Implications of ITC Demerger on Futures and Options Contracts

ITC Limited (ITC) is separating its hotel business into a new entity, ITC Hotels Limited (ITCHL), effective on January 6, 2025 as the record date. This will result in shareholders receiving 1 share of ITC Hotel for every 10 shares of ITC Limited held.

Adjustments in F&O for ITC positions

1. Adhoc Expiry of Existing Contracts:

All existing ITC contracts with expiry dates of January 30, 2025, February 27, 2025, and March 27, 2025, will now expire on January 3, 2025.

2. Introduction of New Contracts:

New derivatives contracts on ITC will be re-introduced from January 6, 2025.

These contracts will have expiry dates of January 30, 2025, February 27, 2025, and March 27, 2025.

3. Option Strikes Availability:

The range of option strikes available for trading on January 6, 2025, will be based on the price discovered in the Special Pre-Open Session (SPOS) of the Capital Market segment on that day.

Details will be provided through a separate circular on January 3, 2025, after market hours.

What will happen to F&O open positions in ITC limited?  

For clients holding F&O contracts expiring on January 30, February 27, and March 27,2025 these contracts shall now expire on January 3, 2025 and liable to be physically settled if not closed before market hours on January 3,2025. 

You can square off existing positions on ICICIdirect on January 3, 2025 or ICICIdirect systems will attempt to close the position by 12 pm for long options and 2:30 for long/short futures and short options if you not have marked this position for physical delivery.

How do I mark my ITC Limited position for physical on ICICIdirect and when do I have to have funds or shares? 

To mark a position for physical delivery, you need to visit your ICICIdirect account, open position page before 11 am on 3^rd Jan 2025 and a new link to ‘Choose Delivery’ will be available against ITC stock contract and choose for Physical Delivery from 31^st Dec 2024.

Here is reference for Futures:

For Options:

Suppose you are long on the stock with long futures, short put or buy call and to take physical delivery, you need to allocate equivalent cash of the contract value in your F&O fund allocation. 

Suppose you have short futures, long puts or short call and you intend to give delivery of shares, you need to ensure that sufficient free shares in your demat account of ITC.

Suppose I don’t intend to take/ give physical delivery of shares then what am I required to do for my F&O open position?       

You need to ensure to close / square off your F&O open position on January 3,2025. 

 What is the margins requirement for ITC contracts for long options?

What if for some reason my position like lack of liquidity couldn’t be squared off on January 3, 2025? 

If for some reason your position couldn’t be squared due to lack of liquidity, then In-the-money (ITM) option contract will be assigned to you. 

If you are holding long call options and it expires the In-the-money (ITM), the contract will be assigned to you and if you don’t have funds. ICICIdirect will receive delivery from exchange and sell next day. The equivalent profit or loss along with statutory charges will be passed to your account. 

If you are holding long put options and the contract expires in-the-money (ITM), you will have to have shares to give delivery. In case the shares are not there in your demat account, it will go for auction. The loss on such transaction (difference between buy or sell) will be debited to your account. If any profit, that also will be credited to your account. 

What will be final price of ITC Limited be on 3^th January,2025 and when will the settlement happen? 

For final settlement, the last half hour weightage average price.

The Pay in/pay out of final MTM settlement of all Futures contracts on ITC Limited shall be on January 6, 2025 (T+1 day).

The physical settlement shall be effected on January 7, 2025 (T+2 day).

It is advisable to monitor your F&O positions in ITC Limited and take timely actions.