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CURRENCY OPTIONS

Currency Options provide a convenient way of taking position. Premium paid for Call or Put options act as a premium paid for insuring a position and is usually a very nominal amount.

An Overview of Currency Derivatives

In Currency Derivatives Segment (CDS), four INR pairs are available for trading at NSE.

These four INR pairs are: -

  • USDINR
  • EURINR
  • GBPINR
  • JPYINR

In a currency pair, left hand side currency is known as base currency and right hand side currency is termed as quote currency. At an exchange base currency is traded for quote currency.

Settlement in Currency contracts at an exchange (NSE) is done in INR.

Both Futures and Options are available for trading in Currency Derivatives

Market is open from 9:00 AM to 5:00 PM

Tick size in currency derivatives is 0.0025 (25% of one paise)

Currency contracts are traded in lots

Daily MTM is done on T+1 and Final Settlement is done on T+2 basis

Highest trading volume is observed in USDINR with more than 90% amongst all currency pairs.

Currency Options

One Lot =1000 Base Currency except in JPY; i.e. 1000 USD, 1,000 GBP, 1000 EUR, 100,00 JPY

Option premium is very low

Options are available in 25 strike prices; 12 ITM, 12 OTM and 1 ATM (25 CE and 25 PE)

Monthly and Weekly Contracts are available for trading in all INR pairs

Weekly Options expire on every Friday

Monthly Options expire two days before last working day of a month by 12:30 PM

Contracts are settled at RBI reference rate

Weekly Options are highly liquid.

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