Posts Tagged ‘USDINR OTM calls


Currency Options USDINR: November series

October series for USDINR currency options will expire on Monday. If nothing unexpected happens on Monday, I expect all my sold call & put options to expire worthless. Sold call options strike ranged from 55.5-58 and sold put options ranged from 50-51.5. Call options sold were naked options but put options were ratio spreads (For every bought 52 put, I had sold 10 lots of 50-51.5 puts).

November series should be tough as compared to October series. It is one of the longest series of the year in terms of number of days. There are a lot of important events in November, which if panned out adversely can put pressure on Rupee. Euro has come down from high of 1.32 to 1.29 in recent weeks. On 31st October, RBI will announce its decision on policy rate cut. RBI is under lot of pressure from the Government and Industry to reduce policy rates. 25 bps CRR cut is at least expected from RBI but repo rate cut will boost Rupee.

US markets have been correcting recently on account of below par quarterly results. After US presidential elections in first week of November, focus will shift to safe resolution of fiscal cliff issue. There might be some be some political posturing and dithering on the issue, but eventually it will pass. More the issue lingers on, world markets will be nervous.

Some more positive action from government on policy front issue will be positive for markets. Passage of NIB (National Investment Board – single window clearance for mega projects mooted by PM) will be big positive in that light. Winter session of parliament will also start in November and I don’t expect anything meaningful from that. This session should pan out more or less in similar manner as last session.

Given all this I have started selling OTM calls for November series. I don’t expect big crack in Rupee on downside. It seems that RBI has bought some dollars around 52 levels in October ( I haven’t sold any puts  till now. It’s wait and watch approach on put side.


Currency options USDINR: September series

US Fed has refrained from announcing unconventional measures (QE3) to prop up slow recovery of US economy and high unemployment rate. Fed chairman, Ben Bernanke statement from Jackson hole was similar to August meet statement. They are ready to act as and when needed but avoided on giving exact timelines. Risk assets have rallied in anticipation of QE3. Euro has also rallied in recent months to 1.265 odd levels. Euro has risen also on hopes of action from ECB in its September 6 meet. Last month, ECB President Mario Draghi statement of “whatever it takes” has also supported EU common currency. Some measures are also expected from ECB in its September 6 meet.

Rupee, which is tracking Euro and higher FII inflows in August has stabilized around 55-56 levels. There is also hope from Indian government on reform front. Although, those hopes are receding fast and it looks difficult to me that congress government will announce any reform measures. Given all these factors I don’t think Indian Rupee will breach 56 in September series also. I have sold USDINR OTM calls of current series. There are downgrade fears of India’s sovereign rating by rating agencies. I think downgrade fears are very real and a couple of months of more inaction on the part of government might prompt rating agencies. It goes without saying that downgrade will be catastrophic for Indian currency and Indian equity markets in short-term.

May 2018
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