Download - Trading currency derivative
Trading Currency Derivative
NSE Trading Basics for Currency Derivative
Content
Introduction to currency derivative in NSEAvailable CurrencyTrading SpecificationCurrency Future Contact SpecificationOption Contacts SpecificationFundamental of Currency Movement
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Introduction to Currency Derivative
NSE started currency future trading on 29th August, 2008
NSE started currency option trading on 29th October, 2010
Any one can trade currency futures and options by opening an account under a broker or trading member
Currency future contracts are available on four international currency- Dollar, Pound, Euro and Yen
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Available Currency and Trading Specification
Currency future contracts are available for 12 months trading cycle
Currency future contracts are available for trade on all days of the week except Saturday, Sunday and holidays declared by NSE in advance
Currency trading time: 9.00 AM to 5.00 PM IST
Screen based automated trading system are available for currency future trading
Internet trading is also available in NSE
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Trading Specification
Quotation: The currency future contracts are quoted in Rupee term, like INR 55.63/$1
Tenor of contracts: Currency future contracts have maximum maturity of12 months
Available Contracts: All monthly maturities from one month to 12 months are available
Settlement: The currency future contracts are settled in cash
in INR Currency future contracts are steeled on last
working day of near month contract
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Trading Specification
Trading of near month future contracts are closed two days prior to settlement day and a new far month contract is introduced
The settlement price is Reserve Bank of India reference rate on the last trading day
Settlement Example:Contract : FUTCURUSDINR31-AUG-2012 (USD-INR Future contract ended on August 2012) Settlement Day: 31st August (last trading day of
August 2012) Last Trading Day: 29th August (two days prior to last working
day) Settlement Price: Reference price of RBI as on 29th August
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Currency future Contract Specification US Dollar
Symbol: USDINR Unit of Trading: 1 unit= $1000 Tick Size: 0.25 paise or INR 0.0025 Quantity Freeze: 10,001 or greater Price operating range
• Tenure upto 6 months: +/- 3% of base price• Tenure greater than 6 months: +/- 5% of base price.
Initial Margin: Span based margin (MTM margin and extra margin is required as per broker and exchange norm)
Settlement: T+1 for daily settlement and T+2 for final settlement (as discussed is previous slide)
Daily settlement price: Calculated on the basis of the last half an hour weighted average price.
Mode of settlement: Cash settled in Indian Rupees
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Currency future Contract Specification EURO
Symbol: EURINR Unit of Trading: 1 unit=1000 Euro Tick Size: 0.25 paise or INR 0.0025 Quantity Freeze: 10,001 or greater Price operating range
• Tenure upto 6 months: +/- 3% of base price• Tenure greater than 6 months: +/- 5% of base price.
Initial Margin: Span based margin (MTM margin and extra margin is required as per broker and exchange norm)
Settlement: T+1 for daily settlement and T+2 for final settlement (as discussed is previous slide)
Daily settlement price: Calculated on the basis of the last half an hour weighted average price.
Mode of settlement: Cash settled in Indian Rupees
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Currency future Contract Specification POUND
Symbol: GBPINR Unit of Trading: 1 unit=1000 GBP Tick Size: 0.25 paise or INR 0.0025 Quantity Freeze: 10,001 or greater Price operating range
• Tenure upto 6 months: +/- 3% of base price• Tenure greater than 6 months: +/- 5% of base price.
Initial Margin: Span based margin (MTM margin and extra margin is required as per broker and exchange norm)
Settlement: T+1 for daily settlement and T+2 for final settlement (as discussed is previous slide)
Daily settlement price: Calculated on the basis of the last half an hour weighted average price.
Mode of settlement: Cash settled in Indian Rupees
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Currency future Contract Specification JAPANESE YEN
Symbol: JPYINR Unit of Trading: 1 unit=1000 YEN Tick Size: 0.25 paise or INR 0.0025 Quantity Freeze: 10,001 or greater Price operating range
• Tenure upto 6 months: +/- 3% of base price• Tenure greater than 6 months: +/- 5% of base price.
Initial Margin: Span based margin (MTM margin and extra margin is required as per broker and exchange norm)
Settlement: T+1 for daily settlement and T+2 for final settlement (as discussed is previous slide)
Daily settlement price: Calculated on the basis of the last half an hour weighted average price.
Mode of settlement: Cash settled in Indian Rupees
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Option Contract Specification
For all currency symbol (Symbol, Tick size, quantity freeze and unit size are same as future) Option type: Premium style European Call & Put
Options Contract trading cycle: 3 serial monthly contracts
followed by 1 quarterly contracts of the cycle March/June/September/December
Strike price: 12 In-the-money, 12 Out-of-the-money and 1 Near-the-money. (25 CE and 25 PE)
Strike price intervals: INR 0.25 Settlement procedure is same as future contract
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Fundamental factors behind Currency
Inflation trend and government policy regarding inflation
Balance of Payment PositionPrevailing interest rate in domestic and
foreign countryTrends in Export and ImportTrends of FDI and FII flow Industry capacity utilizationUnemployment rateRBI policy on Forex etc.
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More Reading
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finance mater http://mymoneygurukul.com/
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