The Board of Directors of OFSS declared a dividend of Rs. 240/- per share, the ex-dividend date being May 07, 2024.
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 an extra-ordinary dividend and the exchange will take action in the adjustment of the futures and options contracts in the underlying security.
Since the dividend declared by OFSS is above 2% of the market value of the security, the exchange has published this circular on the adjustment of F&O contracts in OFSS on the ex-date: May 07, 2024.
Adjustment for future contracts:
All positions in futures contracts of OFSS will be marked-to-market on the last cum-dividend date, i.e. May 06, 2024, 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. 240 (dividend amount) for the respective futures contract.
From May 07, 2024,(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 (100 quantities) of OFSS futures on May 06th, 2024, at Rs. 7520, and the daily settlement price at the market close is Rs. 7600, you would have made a mark-to-market profit of Rs. 80 per share.
On May 07, 2024, the previous day’s position will be carried forward at Rs. 7360 (i.e. 7600 – 240). If the closing price on May 07th, 2024, is Rs. 7440, you’ll make a mark-to-market profit of Rs. 80 per share.
Adjustment for options contracts:
The full value of the dividend i.e. Rs. 240 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. 7500 Call Option will be reduced to Rs. 7260 on May 07th, 2024, and the positions in Rs. 7500 Call Option will continue to exist in Rs. 7260 Call Option.
The lot size of the F&O contracts will not change.
Also, if you hold equity shares of OFSS in your Demat account as of May 07th, 2024 (ex-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.