Corporate Actions
Bonus, mergers, stock splits and more
When a company announces a stock split, it increases the number of its outstanding shares by dividing existing shares into multiple ones. For instance, in a 5:1 stock split, each existing share becomes five shares, and the face value per share decreases proportionally.
This action doesn't change the overall value of your investment, but it adjusts:
The number of shares and the price per share
📈 If You Hold Futures & Options (F&O) Positions Until the Record Date:
Here’s how the stock split impacts your positions:
Adjustments in F&O Contracts Due to Stock Split
To ensure that the value of your F&O positions remains unaffected by the stock split, exchanges make specific adjustments based on the adjustment factor, calculated as:
📐 Adjustment Factor = (New Face Value) / (Old Face Value)
🧮 For a 1:5 stock split (e.g., from ₹10 to ₹2 face value), the adjustment factor is 5.
📉 Futures Contracts
Price Adjustment: The futures price is divided by the adjustment factor
Lot Size Adjustment: The lot size is multiplied by the adjustment factor
Example:
If you hold a futures contract priced at ₹7,000 with a lot size of 75 shares:
New Futures Price: ₹7,000 ÷ 5 = ₹1,400
New Lot Size: 75 × 5 = 375 shares
This ensures your total contract value remains the same
📝 Options Contracts
Strike Price Adjustment: The strike price is divided by the adjustment factor
Lot Size Adjustment: The lot size is multiplied by the adjustment factor
Example:
For an option with a strike price of ₹2,750 and a lot size of 125 shares:
New Strike Price: ₹2,750 ÷ 5 = ₹550
New Lot Size: 125 × 5 = 625 shares
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