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    USDINR Option Strategy

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    narendra_p
    The document outlines 4 currency hedging strategies for companies with import and export exposure. Strategy 1 uses a call and put option at a strike rate of 69.75 to set a floor and ceiling on currency exchange rates. Strategy 2 is similar but at lower cost by using slightly different strike rates. Strategy 3 uses a call option only for companies with only import exposure to cap adverse rate movements. Strategy 4 uses a futures contract in combination with a call option for companies with only export exposure to provide the same protection.

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    USDINR Option Strategy

    Uploaded by

    narendra_p
    144 views1 page
    The document outlines 4 currency hedging strategies for companies with import and export exposure. Strategy 1 uses a call and put option at a strike rate of 69.75 to set a floor and ceiling on currency exchange rates. Strategy 2 is similar but at lower cost by using slightly different strike rates. Strategy 3 uses a call option only for companies with only import exposure to cap adverse rate movements. Strategy 4 uses a futures contract in combination with a call option for companies with only export exposure to provide the same protection.

    Original Description:

    This is an example of how to hedge USDINR exposure via option

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    The document outlines 4 currency hedging strategies for companies with import and export exposure. Strategy 1 uses a call and put option at a strike rate of 69.75 to set a floor and ceiling on currency exchange rates. Strategy 2 is similar but at lower cost by using slightly different strike rates. Strategy 3 uses a call option only for companies with only import exposure to cap adverse rate movements. Strategy 4 uses a futures contract in combination with a call option for companies with only export exposure to provide the same protection.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    144 views1 page

    USDINR Option Strategy

    Uploaded by

    narendra_p
    The document outlines 4 currency hedging strategies for companies with import and export exposure. Strategy 1 uses a call and put option at a strike rate of 69.75 to set a floor and ceiling on currency exchange rates. Strategy 2 is similar but at lower cost by using slightly different strike rates. Strategy 3 uses a call option only for companies with only import exposure to cap adverse rate movements. Strategy 4 uses a futures contract in combination with a call option for companies with only export exposure to provide the same protection.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Strategy 1) Suitable for Corporates having both Imports & Exports exposure.

    Option Strategy - 1
    Option Strike Rate 29-May-19
    BUY $ CALL 69.75 -0.43
    BUY $ PUT 69.75 -0.46
    -0.89
    Option Payoff:-
    If spot at Expiry above 69.75, corporate buys USD at 69.75
    If spot at Expiry below 69.75, corporate sells USD at 69.75

    Strategy 2) Suitable for Corporates having both Imports & Exports exposure – Low Cost strategy.

    Option Strategy -2
    Option Strike Rate 29-May-19
    BUY $ CALL 70.00 -0.36
    BUY $ PUT 69.50 -0.30
    -0.66
    Option Payoff:-
    If spot at Expiry above 70.00, corporate buys USD at 70.00
    If spot at Expiry below 69.50, corporate sells USD at 69.50
    If spot at Expiry between 69.50 & 70.00, corporate neither buys or Sell at any Rate.

    Strategy 3) Suitable for Corporates having Imports exposure only.

    Option Strategy - 3
    Option Strike Rate 29-May-19
    Buy $ Call 69.75 -0.50
    -0.50
    Here client protects the current market rate & adverse movement has been capped by Call option.
    Downside remains completely open.

    Strategy 4) Suitable for Corporates having Exports exposure only.

    Option Strategy - 4
    Option Strike Rate 29-May-19
    SELL USDINR FUT 69.83
    Buy $ Call 69.75 -0.50
    -0.50
    Here client protects the Current market rate & adverse movement has been capped by Call option.

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