The Board of Directors of NTPC at its meeting held on January 28, 2023, declared an interim dividend of Rs. 4.25/- per share, the ex-dividend date being, February 03, 2023.
SEBI has prescribed a framework to the exchanges for adjustment of corporate actions in derivative contracts at the time of the corporate action. The exchange has published everything regarding the adjustments in case of corporate actions here. Accordingly, if a company declares a dividend at and above 2% of the market value of the underlying security, it is considered as extra-ordinary dividend and the exchange will take actions in the adjustment of the futures and options contracts in the underlying security.
Since the dividend declared by NTPC is above 2% of the market value of the security, the exchange has published this circular on the adjustment of F&O contracts in NTPC on the ex-date: February 03, 2023.
Adjustment for future contracts:
All positions in futures contracts of NTPC will be marked-to-market on the last cum-dividend date i.e. February 02, 2023, based on the daily settlement price of the respective futures contract. Subsequently, open positions will be carried forward at the daily settlement price less Rs. 4.25 (dividend amount) for the respective futures contract.
From February 03, 2023 (ex-dividend date), daily mark-to-market settlement of the futures contracts would continue as per normal procedures.
For example:
Assume you bought 1 lot (5700 quantity) of NTPC futures on February 02, 2023, at Rs. 170 and the daily settlement price at the market close is Rs. 190, you would have made a mark-to-market profit of Rs. 20 per share.
On February 03, 2023, the previous day’s position will be carried forward at Rs. 185.75 (i.e. 190 - 4.25). If the closing price on February 3rd is Rs. 188, you’ll make a mark-to-market profit of Rs. 2.25 per share.
Adjustment for options contracts:
The full value of the dividend i.e. Rs. 4.25 will be deducted from all the cum-dividend strike prices on the ex-dividend date. All positions in existing strike prices will continue to exist in the corresponding new adjusted strike prices.
For example:
The strike price of Rs. 190 Call Option will be reduced to Rs. 185.75 on February 03, 2023, and the positions in Rs. 190 Call Option will continue to exist in Rs. 185.75 Call Option.
The lot size of the F&O contracts will not change.
Also, if you hold equity shares of NTPC in your Demat account as of February 04, 2023 (record date) you will be entitled to receive the dividend which will be credited directly to your primary bank account within 30 to 45 days from the record date.