Questions and Answers on the Adjustment of Harvest CSI 300 ETF Options

Derivatives Department of Shenzhen Stock Exchange

According to the announcement of Harvest Fund Management Co., Ltd., Harvest CSI 300 trading open-end index securities investment fund (fund abbreviation "Harvest CSI 300 ETF", fund code "159919") will pay dividends on September 14, 2020. The Shenzhen Stock Exchange (hereinafter referred to as “the Exchange”) will, in accordance with the "Shenzhen Stock Exchange Stock Options Pilot Trading Rules", make corresponding adjustments to all outstanding contracts of Harvest CSI 300 ETF options on the same day and re-list new option contracts. This is the first contract adjustment of Harvest CSI 300 ETF options since its listing. What matters need special attention? Let's take a look together.

1. Question: Why do we need to adjust the unexpired option contracts for the dividend distribution of Harvest CSI 300ETF? Why add new option contracts?

Answer: When the subject of an option contract changes in equity such as dividends, in order to ensure that the rights and obligations of the buyers and sellers of the option contract are not affected by the changes in the subject of the contract, adjustments to unexpired contracts are required. After an option contract is adjusted, the face value of the contract (contract unit × exercise price) remains unchanged, and the contract market value (contract unit × pre-contract settlement price) remains basically unchanged.

After the original contract is adjusted, the contract unit and the exercise price change and become a non-standard contract. At the same time, corresponding standard contracts were newly added to facilitate investors' transactions.

2. Question: What are the specific aspects involved in the adjustment of the Harvest CSI 300 ETF option contract? How to adjust?

Answer: The adjustment to all outstanding contracts of Harvest CSI 300 ETF specifically involves the exercise price, contract unit, contract code and contract abbreviation.

(1) Adjustment factor = [Closing price of Harvest CSI 300 ETF on September 11] / [Closing price of Harvest CSI 300 ETF on September 11-cash dividend (ie 0.152 yuan per share)]

New contract unit = original contract unit (ie 10,000 copies) × adjustment factor

The adjusted contract unit shall be rounded off according to the principle of rounding.

(2) New exercise price = original exercise price / adjustment coefficient

The adjusted exercise price shall be rounded to 3 decimal places.

(3) The 19th digit of the contract code is adjusted to "A", indicating that the option contract is adjusted for the first time, and the other digits remain unchanged.

(4) The exercise price in the contract abbreviation is adjusted to the new exercise price, and the last flag is set to "A".

This time, the dividend for each fund share of the Harvest CSI 300 ETF is 0.152 yuan. Since the closing price of the Harvest CSI 300 ETF on September 11 is unknown, taking the closing price of the Harvest CSI 300 ETF on August 26 at 4.845 yuan as an example, 300 ETF purchases the September 4900 contract. The adjustments are as follows:

3. Question: How to add new option contracts to Harvest CSI 300 ETF on September 14?

The Exchange will use the closing price of Harvest CSI 300 ETF ex-dividend (ex-dividend reference price) as the benchmark to determine the exercise price of the fair value option, and then add new exercise price contracts in sequence according to the exercise price interval. The contract includes 9 exercise prices (1 at-the-money, 4 in-the-money, 4 out-of-money), and 4 expiry months (September 2020, October 2020, December 2020 and March 2021) There are two types of subscription and put, totaling 72 contracts. The contract units of the newly listed contracts are all 10,000.

4. Question: How to calculate the price limit for non-standard contracts and the margin for opening positions on September 14?

Answer: On September 14th, the calculation formula for the price limit of non-standard contracts and the margin for opening positions remain unchanged. The adjusted contract unit and the settlement price before adjustment are used as the calculation basis. Among them, the adjusted settlement price before the contract = the original settlement price before the contract/adjustment coefficient.

5. Question: What issues should be paid attention to for option investors who have covered positions at the end of September 11?

Answer: After the option contract is adjusted, the number of non-standard contract units will be greater than 10,000, and investors with covered positions will face the problem of insufficient covered securities. They should make up the underlying securities in a timely manner on September 14 according to the non-standard contract units, or close the position to correct the insufficient part. At the end of September 14th, China Clearing will lock the corresponding covered securities for delivery based on non-standard contract units. If the covered securities are insufficiently locked, China Clearing will convert the insufficient part of the covered warehouses to ordinary positions and collect corresponding maintenance margins. If the funds are not replenished within the time limit, China Clearing will entrust the Exchange to force liquidation on September 15.

6. Question: What issues should investors with non-standard contracts pay attention to?

Answer: After the option contract is adjusted, the Exchange will no longer add contracts with new expiration months and exercise prices to non-standard contracts. In addition, if the number of positions held in a non-standard contract is zero at the end of the day, the Exchange will delist the contract on the next trading day.

7. Question: Are the adjustment rules of Shenzhen stock option contracts consistent with the Shanghai stock market?

Answer: Generally the same. The little different for the adjustment of option contracts between the two markets is mainly in the handling of insufficient covered securities.