Capital markets regulator Sebi on Tuesday got here out with new adjustment guidelines for dividends in Futures and Options (F&O) scrips.
“It has been decided that the adjustment in derivative contracts shall be carried out in cases where dividends declared are at or above 2 per cent of the market value of underlying stock,” Sebi stated in a round.
The threshold has been revised from 5 per cent and above to 2 per cent and above. The new framework will likely be relevant from Wednesday.
Currently, dividends which might be beneath 5 per cent of the market worth of the underlying inventory are deemed odd dividends and no adjustment within the strike worth is made for such dividends.
For extra-ordinary dividends, which will likely be at and above 2 per cent of the market worth of the underlying safety, the strike worth could be adjusted.
In case of declaration of “extra-ordinary” dividend by any firm, the entire dividend quantity (particular and /or odd) could be diminished from all of the strike costs of the choice contracts on that inventory.
The choice was taken after a number of stakeholders had requested to evaluate the framework and varied options have been examined by the Secondary Market Advisory Committee (SMAC) of Sebi.
Strike worth, in market parlance, is the value at which a spinoff contract could be exercised. It is especially used to explain inventory and index choices.
For name choices, the strike worth is the place the safety could be bought by the choice purchaser up until the expiration date. For put choices, the strike worth is the value at which shares could be bought by the choice purchaser.
Source: www.financialexpress.com”