Reliance F&O Contract Adjustment: What the Bonus Issue Means for Your Trades3 min read
In a significant event for investors & traders, Reliance Industries recently announced a bonus issue, leading to key adjustments in Futures and Options (F&O) contracts associated with the stock. When a company issues bonus shares, F&O contracts need recalibration to reflect the change in share count and price, ensuring the positions held by investors remain proportionate. This article dives into how the Reliance bonus issue has affected F&O contracts, what these adjustments mean for traders, and the potential impact on trading strategies.
On October 28, 2024, significant adjustments will take place in the Futures and Options (F&O) contracts of Reliance due to its announced bonus issue. As outlined by the NSE circulars FAOP64621 and CMPT64652, Reliance will issue a 1:1 bonus, resulting in an adjustment factor of 2. This adjustment impacts futures and options contracts, revising the base prices, strike prices, and lot sizes.
Understanding the Adjustment Factor
The adjustment factor for Reliance’s bonus issue is calculated as (1+1)/1 = 2, since the bonus ratio is 1:1. This factor will apply to Reliance’s F&O contracts as follows:
Futures Contracts Adjustments
- Futures Base Price: The adjusted futures base price will be derived by dividing the settlement price of the contract on the day before the ex-date by the adjustment factor (2).
- Example: If Reliance’s October Futures close at ₹3000 on October 25, the new price on October 28 will be adjusted to ₹1500 (₹3000/2).
- Futures Lot Size: The new lot size will be the previous lot size multiplied by the adjustment factor (2). For instance, if the lot size before the ex-date is 250, the new lot size will be 500.
Options Contracts Adjustments
- Strike Price: Each strike price will be adjusted by dividing the previous strike price by the adjustment factor.
- Example: If you hold a 3000 CE option, the adjusted strike price on October 28 will be ₹1500.
- Options Lot Size: Similar to futures, the lot size for options contracts will be revised by the adjustment factor. For instance, a previous lot size of 250 will be adjusted to 500.
Impact on Equity Shareholders
For shareholders holding Reliance stock in their Demat accounts on the record date, bonus shares will be credited within 15-20 days after October 28, 2024.
This adjustment ensures your existing positions align with the stock’s revised value, reflecting Reliance’s increased share quantity. Make sure to review your holdings and reach out for further support if needed.
Conclusion:
Understanding how bonus issues impact F&O adjustments is essential for investors holding or planning to trade Reliance contracts. By staying informed about these adjustments, investors can align their strategies with the new stock price and contract specifications, ensuring they make the most of this corporate action. As Reliance’s bonus issue enhances liquidity and attracts fresh interest, it presents both opportunities and considerations for F&O traders in the evolving Indian market.
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