Gail Strike price got change from 120pe feb to 113.6pe

Hi there on Friday I have taken gail strike price 120feb pe at 1rs and Friday closing price was 1.9 but today morning
my strike got change from 120 to 113.6 and showing loss how it got change, and what will happen to my profit

GAIL announced a cash dividend of Rs 6.4 per share. Since the dividend is higher than 5% of the CMP of GAIL, this is treated as a extraordinary dividend, this will result in an adjustment in the base and strike price of all F&O contracts. Check this support article for more.

you have to bear the loss

When the company declares the dividend, the opening price on exdate would be after adjustment of the dividend amount (example: Closing price on pre-exdate is Rs 118 then on ex-date open price would be Rs 111.6 ( 118 -6.40)).
To adjust this gap, and extreme loss in F&O segment exchange reduces the strike price of an Option (CE/PE) so there won’t be any loss.

Future average price for B/F position on ex-date = Settlment price on ex-date - dividend declared

For Options, only strike price changes and there won’t be any change in average price.

New strike Price = Old strike price - Dividend declared

Note: in dividend adjustment, lot size remains the same.


@braj2098 you can refer to the given post, for your doubt on the change in strike price.

1 Like

Thanks for the info will check more

Adjustments in case of Corporate Actions


Were the strike price adjusted after 10th Feb also when the dividend was announced ? @Hariprasad0906 @MohammedFaisal

Adjustment in FNO segment will a take place on pre ex-date, for GAIL adjustment was done for position carry forwarded on 16-02-2020.


@Hariprasad0906 @MohammedFaisal
Were the prices adjusted after the announcement of the dividend on 10th Feb(like on 10th night or 11th morning before the trading started) , because people would have had huge losses if the price was not adjusted to account for dividend.(Ex. All the carry forward short positions in Futures market would have suddenly gotten a loss of 6.4*Lot size)
P.S. I know the F&O prices were adjusted on the ex dividend date i.e. 17th Feb the strike prices were reduced by 6.4 for all F&O on carry forward positions on 17th morning

@Shubhanshu_Sharma Company may announce a dividend a week or month before, but whoever bought before the ex-date will be entitled to these benefits and after that stocks trade without any benefits. On ex-date, opening price of the stock will be adjusted with the amount of dividend paid so there may be a gap-down(Dividend) in the spot market this adversely effects in FNO segment and it leads to an extreme loss for the clients who carry forward the positions. To avoid this exchange do an adjust on pre-ex-date for all carry forward positions.

In GAIL scenario Pre ex-date was 14-02-2020.

Company may announce a dividend a week or month before,
Suppose a company announces a dividend in its quarterly results (which passes the metric of extra ordinary dividend ,i.e. more than 5% of the CMP ) having an ex-date of 1 or more months.Any short position in the Futures market which was carry forwarded on the dividend announcement date will be in huge losses because of the price going up due to the dividend, in such scenarios the trader will have to wait till the ex-dividend date to minimize his losses ? or the exchange adjusts the price on the announcement date only i.e. increasing the strike price of the future contracts on the announcement date and then later reducing it on the day before ex-date ? @nithin @MohammedFaisal
I have seen first hand that the strike price is reduced just before the ex-date but not so sure about increasing it after the announcement date and could not find any literature on the same, please shed some light if you have any idea

What do you mean by increasing after announcement?

After a big dividend announcement the stock price generally moves up by the same amount as the dividend announced per share and on the ex-date the stock price moves down by the same amount as the dividend announced per share. To prevent one of the long or short positions becoming a huge loss the strike price is adjusted by the stock exchanges in the Futures segment ,(correct me if I am wrong in my reasoning). The decrease in the strike price of Futures contracts which were carried forwarded to the ex-date showed this (as I held one of the Futures contracts during this period so I know), I wanted to know that whether similar thing happens (i.e strike price is increased by the same amount as the dividend offered) after the announcement of the dividends ? @siva @nithin @MohammedFaisal @Hariprasad0906