Currency Options USDINR: March series

February series for USDINR option expired on 26th February. My sold 52 puts expired worthless (https://writingoptions.wordpress.com/2013/02/08/currency-options-usdinr-february-series/). I had rolled over sold puts to March series. In march series apart from 52 puts, I have also sold 52.5 puts. In last week there has been risk off in global markets. Risk off is best reflected by the Euro level of 1.3 and Dollar Index above 82 levels (Dollar Index level is skewed by the sharp depreciation of JPY).

I was selling USDINR puts aggressively after Union budget on 28th February. IV’s were high and there was expectation that FM might announce big bang growth measures. INR rallied till 53.6 levels and sold immediately to 54.9 level by the end of budget day. I expect INR to remain weak on account of high current account deficit with periods of volatility. In case INR appreciates to levels of 52-53, it should provide opportunity to sell some more puts (But I am worried about this trade because Mr. Sudarshan Sukhani (CNBC TV18) is also bearish on INR and expects it to touch 57 level 🙂 ).

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Currency Options USDINR: February series

January series for currency option expired on 29th January. My sold 57 calls expired worthless (https://writingoptions.wordpress.com/2012/12/28/currency-options-usdinr-january-series/). INR has appreciated since the start of February series on the back of consistent FII inflows. Globally also there is risk-on rally going on currently. I am a bit skeptical about the INR rally beyond 53 levels. RBI has increased FII debt limit by $5 billion each in certain debt instruments. Total of $ 10 billion is expected to flow in Indian debt market. This might result in some amount of appreciation in INR. But I don’t expect INR to appreciate beyond 52 levels on account of high current account deficit (CAD) numbers. Brent crude oil has also slowly and gradually moved to levels of $118/barrel. February series has an important event in terms Union Budget to be presented on 28th February. Technically, it is after the expiry of February series on 26th Feb, so it should impact March series. Good budget on fiscal front should result in some FII inflows and INR appreciation.

I sold a few 52 puts and 57 calls for February series. I have squared off 57 calls but 52 puts are still open. I am looking to rollover my sold puts to March series on any INR appreciation.

 

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 (http://www.moneycontrol.com/news/rupee/rbibuysdollarat52_774013.html). I haven’t sold any puts  till now. It’s wait and watch approach on put side.