Shriram Finance (₹2,898.90) has announced a share split with a ratio of 5:1. So, the adjustment factor will be 5. The split will lead to necessary adjustments in the futures and options (F&O) contracts on this stock on the record date.
The company has decided January 10 as the record/effective date. On this day, the stock price and all derivatives contracts on Shriram Finance will be adjusted appropriately.
With respect to adjustment in futures contracts, the reference rate of the relevant contract on January 9 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 to January 10 at the daily settlement price on January 9 divided by 5, the adjustment factor.
Suppose the nearest expiry futures closes at ₹3,000 on January 9, it will be revised to ₹600 (₹3,000 divided by 5). Also, the lot size will be increased five times from current 150 shares to 750 shares per contract. Hence, there won’t be any change in the contract value.
Likewise, in options, all the strike prices in the option chain of Shriram Finance will be divided by 5 from January 10. For example, the strike price of 2,500 and 3,000 will be modified to 500 and 600 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.