Futures & Options A Hedging Tool

A futures contract is a standardized contract, traded on an exchange, to buy or sell a certain underlying asset or an instrument at a certain date in the future, at a specified price.

What is an Option?
A Currency Option is an option, but not an obligation to buy or sell currency during a specified time period at a specified price The price or value of the option is called the premium Two different Options: 1. 2. Call Option Put Option

What is a Call -and a Put Option?

A currency Call option is an option but not an obligation to buy currency during a specified time period at a specified price A currency Put option is an option but not an obligation to sell currency during a specified time period at a specified price

Product Features
Minimum Amount Required to open an account is Rs. 10,000 Now Terminal will be available for online trading Trading in Currency options are also available Tick size is 0.0025 1 lot = 1000 units

Margin Detail
Currencies traded USD - INR Lot size 1000 *Margin % 2.27% CMP Liquid contracts 44.73 May,June Margin Amount 1015.371

GBP - INR

1000

2.50%

73.9 May,June

1847.5

EUR - INR

1000

2.34%

66.45 May,June

1554.93

JPY - INR

100000

3.81%

0.5555 May,June

2116.455

Difference between forward & Future contracts:

Forward Contracts
Forward contracts are private and custom made agreements between banks and and its clients (MNCs, exporters, importers, etc.) are not as rigid in their stated terms and conditions. No marked to market is debited on daily basis High commission is charged by bank for this transaction No market accessibility

Future Contracts
Future Contracts are exchange-traded and, therefore, are standardized contracts. Its being traded on NSE,MCX and USE platform Futures contracts are marked-to-market daily, which means that daily changes are settled day by day until the end of the contract. Lesser brokerage is charged on hedging or speculation by brokers Global accessibility to the market on terminal provided by the exchanges All futures contracts are settled using cash, NOT the delivery of the commodity/asset. Initial margin payment is needed. This contract is standardized to the needs of the customers. Client can square off his position anytime before the expiry of contract

Most of forward contracts are settled with delivery or receipt of the asset Usually no initial payment is required. This contract is customized to the needs of the customers. Once the contract has been made, it is very difficult to undo it till the expiry date is over.

Example of Forward and Future Contract :

Eg. : USDINR Spot rate : 46.00 Forward rate : Feb : 46.2032 46.2181 Mar : 46.4525 46.4725 Apr : 46.73 46.75 Future rate : Feb : 46.21 46.2125 Mar : 46.45 46.4525 Apr : 46.72-46.7225

If client wants to buy one lot then gain\Loss as per below mentioned contracts will be : Forward Price Future Price Brokerage @ 3% Future price Min brokerage charged Difference (Forward price Future price) -0.00440 0.01000 Difference per 1000 lots in Rs. -4.4 10

46.2181 46.4725

46.2125 46.4525

0.004621 0.004645

46.22 46.46

0.01 0.01

46.75

46.7225

0.004672

46.73

0.01

0.01750

17.5

If client wants to sell one lot then gain\Loss as per below mentioned contracts will be :
Forward Price Future Price Brokerage @ 3% Future price Min brokerage charged Difference (Forward price Future price) -0.01680 -0.00750 0.00000 Difference per 1000 lots

46.2032 46.4525 46.73

46.21 46.45 46.72

0.004621 0.004645 0.004672

46.22 0.01 46.46 0.01 46.73 0.01

-16.8 -7.5 0