Well, folks, BSE (₹7,285*) is shaking things up by announcing a bonus with a ratio of 2:1. In simple terms, this means the adjustment factor will be 3. This bonus will have a ripple effect on the futures and options (F&O) contracts on this stock on the record date, which the company has set as May 23. So, get ready for some necessary adjustments coming your way on that day.
Adjustments in futures contracts are going to be based on the reference rate of the relevant contract on May 22. This reference rate will be determined by the mark-to-market settlement price of the futures contract. What does that mean for you? Well, your open positions will be carried forward to May 23 at the daily settlement price on May 22 divided by 3, thanks to the adjustment factor. For example, if the nearest expiry futures close at ₹7,500 on May 22, it will be revised to ₹2,500 (₹7,500 divided by 3). Additionally, the lot size will triple from the current 125 shares to 375 shares per contract. But hey, don’t worry, the contract value will remain the same.
Now, let’s talk options. All the strike prices in the option chain of BSE will be divided by 3 starting from May 23. So, if you had your eye on the strike price of 7,000 and 7,250, get ready for them to transform into 2,333.35 and 2,416.65 respectively. These adjustments might sound like a lot to take in, but hey, they shouldn’t really change the overall trend of this stock. So, traders, just stick to your guns and keep an eye out for the changes in the contracts you’re holding. And remember, the adjustments are coming your way on May 23.