Oil India has declared a dividend of Rs. 8.5 and record date is 22 Feb. Oil India Feb Fut is at 171. Why can’t one buy a large quantity of Oil India in cash, and sell same in future, later on, expiry square off both and pocket the Rs. 8.5 dividend?
Oil India has declared a dividend of Rs 8.5 and the record date is Feb 22. Can I the buy the stock in cash and sell futures and pocket the dividend?
As per the SEBI guidelines for adjustments in F&O contracts, a dividend of 5% and above of the market price of the underlying is considered to be an extraordinary dividend.
Oil India has declared a dividend of Rs. 8.5 which is above 5% of the market price of the underlying as on the dividend announcement date. Hence, there will be an adjustment in the F&O contracts on the ex-date. The adjustment for this particular case has been explained here.
Due to this adjustment, there wouldn’t be any arbitrage opportunity. You can know more about corporate action adjustments here.