Notice

Telstra Corporation Limited (TLS) $0.03 Special Dividend – Adjustment Implication for ETOs

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Notice reference number: 0162.20.02
Date published: 25/02/20
Effective as of: 26/02/20
Last updated: 25/02/20

This Notice is being issued to provide Participants with further information on the adjustment implication for TLS ETOs

Telstra Corporation Limited $0.03 Special Dividend – Adjustment implications for ETOs 

ASX Notice No. 0121.20.02 dated 14 February 2020 described the adjustment method that applied to ETOs over Telstra Corporation Limited (ASX Code: TLS) relating to the $0.03 special dividend with ex-dividend date of 26 February 2020. 

Effective Date

The effective date of the adjustment is Wednesday, 26 February 2020, when the underlying security commences trading on an ex-dividend basis. 

ASX determined that the last cum-dividend VWAP based on trading on ASX markets on Tuesday, 25 February 2020 was $3.6033

 

Standard Method of Adjustment

For an old contract size of 100 shares, the new contract size will be adjusted, using TMC threshold truncation. 

Theoretical New Contract Size = Old Contract Size + (total special dividend paid per Old Contract Size)/(S – OD – SD)

Theoretical New Contract Size = 100 + ($0.03*100)/($3.6033-$0.05-$0.03)

=100.8515 truncated to 100 where the difference of 0.8515 will be cash adjusted based on the below formula. 

Strike Factor = Old Contract Size/Theoretical New Contract Size

Strike Factor = 100/100.8515

                     = 0.991557

 

Cash Equalisation Adjustment Payments for Contract Size Roundings

The cash adjustment is calculated by taking the difference between the contract value of the option before and after the adjustment.  Variants to the formula apply for rights style adjustments and when the adjustment occurs on the day of the option’s expiry.

Cash adjustment = (BOP * BUV) – (AOP * AUV)

Where

BUV =Before (adjustment) Unit Value = BP * BU rounded to nearest cent

AUV =After (adjustment) Unit Value = AP * AU rounded to nearest cent

BU = units per lot (multiplier) before the adjustment (old traded entity)

AU = units per lot (multiplier) after the adjustment (old traded entity)

BP = for rights style, =SP/Adjustment Factor, for non-rights style=SP.

AP = for rights style, =SP, for non-rights style=SP * Adjustment Factor.

SP = settlement price of the option if not the options expiry day, otherwise the intrinsic price (underlying price-strike price for calls, strike-underlying price for puts) if on expiry date.  Refer Notes 1 and 2 below

BOP =pre-adjusted open position Refer Notes 1 and 3 below

AOP =post-adjusted open position Refer Notes 1 and 3 below

Note:

  1. Cash adjustments on expiry will apply to exercised positions only. 

  2. The intrinsic price used for exercised positions on expiry is based on the adjusted strike price for rights style adjustments and the pre-adjusted strike price for non-rights style adjustments.  Set negative intrinsic prices to zero i.e. if an out of the money is exercised, the intrinsic price and hence cash adjustment is zero. 

  3. Pre and post adjusted positions will be the same unless there is a position adjustment factor applied to the open position associated with the adjustment.  For rights style use the start of day position (i.e. exclude any UA trading activity), for non-rights style use the (end-of-day) position prior to the adjustment. 

  4. Cash adjustments will also apply to LEPO positions. 

  5. For short positions, the result of the cash adjustment formula should have its sign reversed (multiply by -1). For non-LEPO positions the truncation approach ensures that the seller (writer) is always debited and the buyer (taker) is credited.  Because the LEPO strike is usually returned to 1c after the adjustment, the holder of a short LEPO position may be credited and long position may be debited.

Refer to table below for adjusted strike and contract size

Participants are advised that due to the large number of strikes and the low strike increments on the TLS options, some existing American and European contracts at the same strikes (with different expiry months) can be adjusted to the same strike level if the American and European contracts are not falling in the same expiry month. 

OLD SIZE

NEW SIZE

OLD STRIKE (CENTS)

NEW STRIKE (CENTS)

Exercise

100

100

1

1

E

100

100

182

180

A

100

100

184

182

A

100

100

192

190

A

100

100

194

192

A

100

100

196

194

A

100

100

212

210

A

100

100

214

212

A

100

100

216

214

A

100

100

220

218

A

100

100

221

219

E

100

100

231

229

A

100

100

232

230

E

100

100

233

231

A

100

100

234

232

E

100

100

236

234

A

100

100

238

236

A

100

100

250

248

A

100

100

253

251

A

100

100

254

252

E

100

100

255

253

A

100

100

258

256

A

100

100

260

258

A

100

100

262

260

A

100

100

269

267

A

100

100

270

268

A

100

100

270

268

E

100

100

271

269

E

100

100

272

270

A

100

100

273

271

E

100

100

275

273

A

100

100

276

274

E

100

100

278

276

A

100

100

279

277

A

100

100

280

278

A

100

100

282

280

A

100

100

285

283

A

100

100

289

287

A

100

100

290

288

A

100

100

292

290

A

100

100

293

291

E

100

100

295

293

A

100

100

298

295

A

100

100

299

296

A

100

100

300

297

A

100

100

302

299

A

100

100

303

300

E

100

100

304

301

A

100

100

307

304

A

100

100

310

307

A

100

100

311

308

E

100

100

314

311

A

100

100

317

314

A

100

100

318

315

E

100

100

320

317

A

100

100

321

318

E

100

100

324

321

A

100

100

327

324

A

100

100

328

325

E

100

100

330

327

A

100

100

331

328

E

100

100

334

331

A

100

100

335

332

E

100

100

336

333

A

100

100

337

334

A

100

100

337

334

E

100

100

340

337

A

100

100

341

338

E

100

100

344

341

A

100

100

345

342

E

100

100

346

343

A

100

100

347

344

E

100

100

350

347

A

100

100

351

348

E

100

100

354

351

A

100

100

355

352

E

100

100

356

353

A

100

100

357

354

A

100

100

357

354

E

100

100

359

356

A

100

100

360

357

A

100

100

360

357

E

100

100

361

358

E

100

100

363

360

A

100

100

365

362

A

100

100

366

363

E

100

100

369

366

A

100

100

370

367

A

100

100

370

367

E

100

100

371

368

E

100

100

373

370

A

100

100

375

372

A

100

100

376

373

E

100

100

377

374

A

100

100

379

376

A

100

100

380

377

A

100

100

380

377

E

100

100

381

378

E

100

100

383

380

A

100

100

385

382

A

100

100

386

383

E

100

100

388

385

A

100

100

389

386

E

100

100

390

387

A

100

100

391

388

E

100

100

393

390

A

100

100

394

391

A

100

100

394

391

E

100

100

395

392

E

100

100

396

393

E

100

100

397

394

A

100

100

398

395

A

100

100

399

396

E

100

100

400

397

A

100

100

401

398

E

100

100

403

400

A

100

100

404

401

A

100

100

404

401

E

100

100

405

402

E

100

100

408

405

A

100

100

409

406

E

100

100

410

407

A

100

100

411

408

E

100

100

413

410

A

100

100

414

411

A

100

100

415

412

E

100

100

417

413

A

100

100

418

414

A

100

100

419

415

E

100

100

420

416

A

100

100

421

417

E

100

100

423

419

A

100

100

424

420

A

100

100

424

420

E

100

100

425

421

E

100

100

427

423

A

100

100

428

424

E

100

100

430

426

A

100

100

432

428

A

100

100

433

429

E

100

100

436

432

A

100

100

437

433

A

100

100

438

434

E

100

100

440

436

A

100

100

442

438

A

100

100

443

439

E

100

100

447

443

A

100

100

448

444

E

100

100

450

446

A

100

100

452

448

A

100

100

456

452

A

100

100

457

453

A

100

100

458

454

E

100

100

460

456

A

100

100

461

457

A

100

100

466

462

A

100

100

471

467

A

100

100

475

471

A

100

100

476

472

A

100

100

480

476

A

100

100

481

477

E

100

100

491

487

A

100

100

492

488

E

100

100

505

501

A

100

100

506

502

E

100

100

510

506

A

100

100

511

507

E

100

100

516

512

A

100

100

517

513

E

100

100

529

525

A

100

100

530

526

E

100

100

535

530

A

100

100

536

531

E

100

100

553

548

A

100

100

554

549

E

100

100

564

559

A

100

100

565

560

E

100

100

625

620

A

100

100

626

621

E

100

100

639

634

A

100

100

640

635

E

Need more information?

Issued by

Brendan Laird, Senior Manager, Settlement Operations

Contact information

Equity Operations
1800 814 051
CHESSHelp@asx.com.au

Disclaimer