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Hero MotoCorp (₹4,894.3) had announced a dividend of ₹100 for the financial year 2023-24. So, there will be adjustment in the stock price and consequently its futures and options (F&O) contracts on the record date.
The company has fixed February 21, as the record/ex-dividend date. On this day, the stock price will be adjusted for the dividend and all the derivative contracts on this stock will be altered in line with the dividend amount.
For the purpose of adjustment in futures contracts, the reference rate of the relevant contract on February 20 will be considered. The reference rate will be the mark-to-market settlement price of the relevant futures contract. Hence, the open positions shall be carried forward at the daily settlement price on February 20 less the dividend of ₹100.
For instance, if the nearest expiry futures close at ₹5,000 on February 20, it will be adjusted to ₹4,900. Consequently, the contract value will come down from ₹15 lakh to ₹14.7 lakh.
With respect to options, all the existing strike prices in the option chain will be deducted by ₹100 on February 21. For example, the strike price of 4900, 5000 and 5100 will be modified to 4800, 4900 and 5000 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 they hold.
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