Canara Bank (₹617.6) had announced a split in share with a ratio of 5:1. Consequently, the share price will be divided by 5. This will also lead to necessary adjustments in the futures and options (F&O) contracts on this stock on the record date.

The company has decided May 15 as the record/effective date. On this day, the stock price and all derivatives contracts on Canara Bank will be adjusted according to the split ratio. Hence, the lot size, which is now 1,350 shares per lot, will become 6,750 shares (1,350 multiplied by 5) on the record date.

With respect to adjustment in futures contracts, the reference rate of the relevant contract on May 14 will be considered. Reference rate will be the mark-to-market settlement price of the relevant futures contract. So, the open positions shall be carried forward at the daily settlement price on May 14 divided by 5.

For example, if the nearest expiry futures close at ₹625 on May 14, it will be revised to ₹125 (₹625 divided by 5). That said, the contract value will remain the same.

Likewise, in options, all the strike prices in the option chain of Canara Bank will be divided by 5 from May 15. For example, the strike price of 600, 605 and 610 will be altered to 120, 121 and 122 respectively.

That said, the above measures are not likely to impact the overall trend of this stock. So, traders can stick to their views and are only required to note the changes in the contracts that they hold.

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