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Currency Futures & Option An Exchange Traded Derivative

Currency Futures & Option An Exchange Traded Derivative. OTC V/S CF. Currency Futures: Product Design. Margin Calculation. USDINR: 1389.58 per lot or 2.09% Calculation : 66.50*1000 = 66,500 = 1389.58/66500

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Currency Futures & Option An Exchange Traded Derivative

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  1. Currency Futures & OptionAn Exchange Traded Derivative

  2. OTC V/S CF

  3. Currency Futures: Product Design

  4. Margin Calculation • USDINR: 1389.58 per lot or 2.09% Calculation : 66.50*1000 = 66,500 = 1389.58/66500 = 2.09% • EURINR: 1777.87 per lot or 2.34% • GBPINR: 2739.28 per lot or 2.88% • JPYINR: 2308.05 per lot or 3.76%

  5. PROBLEM • USD/INR spot rate on 11th April was 66.42/66.43 • On 11th April future contract was trading at 66.58/66.5825 • Contract expiry date 27April • On expiry date, contract settled at 66.7225 One of the investor has bought 15 lot of 27th April contract as on 11th April & exited at settlement rate on expiry date. So, what will be his total profit ????

  6. ANSWER • He buy at 66.5825 & sell at 66.7225. Thus Net profit is, = ((66.7225-66.5825)-.02)*1000*15 = Rs.1,800 We assume brokerage of two paise on round trip.

  7. CF as hedging tool Why corporate use CF to hedge their exposure ? Great Prices with transparency Execution Accessibility Hedging Timing Benefit No need for proof of Underlying exposure Online trading terminal for immediate access No need to pay bid-offer spreads in spot and forwards OTC Lower transaction Cost Lower margin

  8. THANK YOU

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