Power Grid Corporation of India (₹247.35) had announced a dividend of ₹4.75 for the financial year 2022-23. 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 August 8 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 August 7 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 August 7 less the dividend of ₹4.75.
For instance, if the nearest expiry futures closes at ₹250 on August 7, it will be adjusted to ₹245.25. Consequently, the contract value will come down from ₹6,75,000 to ₹6,62,175.
With respect to options, all the existing strike prices will be deducted by ₹4.75 on August 8. For example, the strike price of 247.50, 250 and 252.50 will be altered to 242.75, 245.25 and 247.75 respectively.
The above measures are less 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.