1. Currency Futures & Option An Exchange Traded Derivative

2. OTC V/S CF OTC Market (Forward) Currency Futures Product
Traded on the Exchange
OTC Product
Agreements
Customized
Standard
Price Transparency
Low
High
Underlying exposure
Required
Not required
Accessibility
Credit dependent
Liquidity
Subject to credit limits
Credit Exposure
Yes
Mitigated through the clearing corporation
Margins (Collateral)
Subject to banks relation & market condition
Daily MTM No

3. Currency Futures: Product Design
Category
Description
Exchange
NSE & MCX – SX
Underlying
USD/INR currency pair
Contract Size
USD 1000
Min Price fluctuation
0.25 paisa or INR
Category
Description
Settlement
Cash settled in INR on relevant RBI reference rate
Expiry Date
Two working days prior to last business day of the month
Margin
Dictated by exchange (currently at 2.09%)
Contract Months
All months with max maturity of 12 months

6. Margin Calculation USDINR: 1389.58 per lot or 2.09%
= /66500
= 2.09%
EURINR: per lot or 2.34%
GBPINR: per lot or 2.88%
JPYINR: per lot or 3.76%

7. PROBLEM USD/INR spot rate on 11th April was 66.42/66.43
On 11th April future contract was trading at 66.58/
Contract expiry date 27April
On expiry date, contract settled at
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 ????

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

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

11. THANK YOU