Stock splits, bonuses, dividends, buybacks, mergers — all can change your option contract's terms mid-flight. The exchange adjusts strike, lot size, or both. Understanding these adjustments prevents nasty surprises.
NSE F&O contracts are adjusted for:
Regular quarterly/annual dividends below a threshold do NOT trigger adjustments (the drop is priced in normally).
The contract value must remain the same post-adjustment as pre-adjustment.
Adjustment factor = (Number of new shares) / (Number of old shares)
New strike = Old strike × (1 / Adjustment factor) New lot size = Old lot size × Adjustment factor
Reliance stock: ₹3,000. Lot size: 250. Strike: 3,000. Premium: ₹100.
Reliance announces 1:1 bonus (one new share per share held).
Post-bonus:
Total notional value unchanged: 1,500 × 500 = 7,50,000 = same as 3,000 × 250 = 7,50,000.
Your premium value should also adjust proportionally.
Same idea:
Infosys at ₹1,800. Lot 400. Strike 1,800.
2:1 split announced (one share becomes two).
Post-split:
Contract value: 900 × 800 = 7,20,000 = same as 1,800 × 400.
If the split ratio doesn’t produce clean numbers, exchanges may adjust differently:
3:2 stock split example:
NSE handles fractional strikes by rounding, or issuing “adjusted” contract series with different labels.
Regular dividends (₹5-40 per share range) are typically small enough that no adjustment is made. The stock simply drops by the dividend amount on ex-date, and options price this in normally.
Special dividends (extraordinary, one-time payouts) DO trigger adjustments:
The most complex adjustments. Depends on scheme details:
Each case is unique. NSE publishes detailed circular per event.
1. Monitor corporate action calendars for your positions:
2. Close positions before ex-date if you’re not comfortable:
3. If holding through the event:
Sometimes stocks approach a strike right around the ex-date. If assignment happens on the last day pre-ex-date, you may end up delivering (or receiving) shares that are about to be affected by the corporate action — creating awkward accounting.
Best practice: don’t hold expiry-week options through a scheduled corporate action.
Company announces a share buyback at fixed price. Retail participation is limited. Effect on options:
Not usually a major factor for options traders, but worth awareness.
| Event | Frequency | Option impact |
|---|---|---|
| Stock split | 1-3 per year across F&O stocks | Strike + lot adjust; total value preserved |
| Bonus issue | Occasional | Same adjustment |
| Regular dividend | Quarterly/annual | Priced in; no adjustment |
| Special dividend | Rare; e.g., Coal India specials | Strike reduced by dividend amount |
| Buyback | Occasional | Usually no adjustment; some premium impact |
| Merger | 1-5 F&O stocks per year | Complex; case-by-case circular |
| Demerger | Very occasional | Strike split between entities |
If you don’t want to deal with corporate action adjustments:
This is what most retail traders do. Index options avoid 95% of corporate-action headaches.
NSE Circular section (nseindia.com → Circulars → F&O Segment). Search for “Adjustment” or the stock symbol. Details of every past adjustment are documented.