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See our Privacy Policy and User Agreement for details. Published on Jan 10, Currency Derivatives with HDFC securities is easy, seamless and online. Know the benefits of Trading in Currency Derivatives and How to trade in Currency Derivatives. More on HDFC securities. Clipping is a handy way to collect and organize the most important slides from a presentation.

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SlideShare Explore Search You. Know how to trade in currency derivatives. Show related SlideShares at end. Full Name Comment goes here. Are you sure you want to Yes No. Embeds 0 No embeds. No notes for slide. Know how to trade in currency derivatives 1. Currency Derivatives is ONLINE 2.

What are Currency Derivatives? Derivatives are Future and Options contracts which you can buy or sell specific quantity of a particular currency pair at a future date. Currency Derivative is similar to the Stock Futures and Options but the underlying happens to be currency pair i. USDINR, EURINR, JPYINR OR GBPINR instead of Stocks. Forex rates are the value of a foreign currency relative to domestic currency Currency trading is done in the Foreign Exchange markets — one of the biggest financial markets Major participants — Banks, Corporations, Exporters, Importers Derivatives are Future and Options contracts which you can buy or sell specific quantity of a particular currency pair at a future date.

Forex rates are the value of a foreign currency relative to domestic currency Currency trading is done in the Foreign Exchange markets — one of the biggest financial markets Major participants — Banks, Corporations, Exporters, Importers 3. Currencies TradedCurrencies Traded Forex Trading is done in currency pairs such as: Factors affecting ExchangeFactors affecting Exchange RatesRates 6.

Pays a premium for this. Strategies using CurrencyStrategies using Currency TradingTrading 9. Hedging means taking a position in the future market that is opposite to a position in the physical market with a view to reduce or limit the risk associated with unpredictable changes in the exchange rate.

A crude oil importer wants to import oil worth USD 1,00, He places the import order on 15 July , with the delivery date being four months later. At the time of placing the contract one US Dollar is worth Hedging StrategiesHedging Strategies The hedging strategy for the importer at the time of placing the order would be: Current Spot rate 15 July Sell USD - INR October contracts in October at Hedging StrategiesHedging Strategies A jeweller who is exporting gold jewellery worth USD 50, in July wants protection against possible Indian Rupee appreciation in December , i.

He wants to lock in the exchange rate for the above transaction. His strategy would now be: Sell 50 USD - INR December contracts on 15 July Had he not participated in the Futures market, he would have got only INR 32,55, Types of HedgingTypes of Hedging Short Hedge — E.

An exporter who is expecting a receipt of the US Dollar in the future will try to fix the conversion rate by holding a short position in the USDINR. If exporter is expecting USD 1,, after three months Current Spot rate of USDINR is If spot rate of USDINR becomes Long Hedge — E.

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An importer who has to make payment for his imports in USD will take a long position in USDINR and thus fix the rate at which he can buy the USD. While hedging, any losses incurred in the fut mkt will be compensated by movements in the spot market.

Converse is also true. Speculation is to take risks and profit from anticipated price changes in futures price of an asset A speculator will buy futures contracts long position if he anticipates an increase in the price of the currency in future and vice versa.

Hold a long position in Base currency if you expect it to go up in value. Buy USDINR if you expect the US Dollar to gain in the future. Hold a short position in Base currency if you expect it to go down in value.

Sell USDINR if you expect the US Dollar to lose value in the future. Currency Future enable the trader to benefit from leverage. Downside risks are however greater. Strategies using Currency FuturesStrategies using Currency Futures For e. If a trader buys USDINR in spot market at After three months, if USDINR increases to Total profit earned is Rs. Return on investment is 3. Strategies using Currency FuturesStrategies using Currency Futures In Futures market: If USDINR moves higher, trader will earn the difference on settlement.

Assuming USDINR moves up to How to Activate this facility?

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Know how to trade in currency derivatives

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