Vedanta Dividend - Effect on F&O

Vedanta has announced record date of 9th September 2021, with share going ex dividend from 8th Sept., for the first interim dividend of FY22, to be considered by the Board on Wednesday 1st September. Futures & certain options contract may be worse-off than today, if dividend of anything up to Rs. 14.75 is declared, being less than 5% of prevailing market price, (considering closing price of Rs. 299). Those at a disadvantage will be:

    Futures long position
    Call buyers, of all strike rates
    Put sellers, with strike rate of Rs. 285 and above

Conversely, Call sellers and Put buyers will benefit, due to such ‘ordinary’ dividend.

However, if the divided is extra-ordinary i.e. dividend amount is 5% or above of Tue’s closing price, (assuming it at Rs. 300, with dividend of Rs. 15.50 or more) futures price and strike price of all option contracts will be adjusted, and will get reduced for Options, and will be given a MTM credit to all Future Long positions, thus making all the F&O positions at no-profit-no-loss.

Hence, it would be safe to play the Vedanta through cash market for next 7 days, and better to assess the same in market hours tomorrow, after declaration of dividend vis-a-vis closing rate on 7th September.

So, this 1 rupee can make games of crores of rupees for F&O traders.

This is not a Buy or Sell recommendation, while stock recommendations are provided exclusively to our paid members in the Member Zone.