What is the impact of corporate actions on futures and options?

Corporate actions such as bonuses, rights, extra-ordinary dividends, mergers/demergers, amalgamations, splits, and consolidations will cause adjustments in the futures and options contracts due to change in the underlying stock.

The basis for any adjustment for corporate actions shall be such that the value of the market participant’s positions, on the cum and ex-dates for the corporate action, shall remain the same to the greatest extent possible.

In some situations, where the adjustment factor is applied to a contract, it can lead to changes in the base price, option strike values and market lot. This is because the adjustment factor is used to account for changes in the underlying asset, such as a stock splits or a corporate action like dividend. When these changes occur, it can have an impact on the value of the contract, which is why adjustments are made. These adjustments can result in changes to the expiry date of the contract, because the original terms of the contract may no longer be valid.

Due to the revision in lot size, after market orders (AMOs) placed on days prior to the ex-date will not be processed. The order will be rejected with the error message "Order Rejection Status 16273: Record Does Not Exist."

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