SEBI Updates: SEBI reviews mechanism of dividend adjustment for stock option

SEBI on 05^th July, 2018, issued a Circular for reviewing the mechanism of dividend adjustment for stock options and allowed alteration in strike price.

According to the SEBI, adjustment in strike price will be carried out in case dividend declared by a company is above 5 per cent of the underlying stocks. Besides, adjustment in strike price will be done in all other cases of dividend, wherein listed company has sought exemption from the timeline prescribed under listing and disclosure regulations, SEBI said in a circular.

According to the SEBI, adjustment in strike price will be carried out in case dividend declared by a company is above 5 per cent of the underlying stocks. Besides, adjustment in strike price will be done in all other cases of dividend, wherein listed company has sought exemption from the timeline prescribed under listing and disclosure regulations, SEBI said in a circular.

Strike price, in market parlance, is the price at which a derivative contract can be exercised. It is mainly used to describe stock and index options. For call options, the strike price is where the security can be purchased by the option buyer up till the expiration date. For put options, the strike price is the price at which shares can be sold by the option buyer.

Copy of Circular can be accessed below.