® NSE ‘An investment called India Ui fea ea te Peas CURRENCY OPTIONS, bxtensiveglobslzation and liberalization of taign economy has lead oan he ligest and most bquid nancial market in the worl. Volt frchange rates afect the value of 2 corporates operating cash fo, income tatement,and its compettive pose on Wafers the balance sheet by enanging tne value of the ims asets an Lables, accounts payable, ute recevables, ventory et. Ths na le to 9 requirement of 3 ac based, acive and iquid forex cerhatves market to provide a basket of hedging instruments for elective management charge rency Derivative has alto emerged ae 29 reve asses chs for ‘ireney cations Provde on onporiniy {0 take @ view on Exchange Pate ane Investment one heeging objectives, and interesting Whats an Option? ‘An option'sacontract which gives he options buyer tne ight but ligation, r9 buy oF sll he underlying a 2 stated date and at 2st to buy US doll 5 I Bought and ancther Jat (USD) or naan res NR an option.o sell USD fr Nisan The ke pie, expiration perio, art stock option sale Fer example 2 isan USD calland an NR ar USD put and an INR cal The the” American syle or European Exchange Traded Currency Options predefined matures, They ate easily accesible when compared ith dervatives contacts Now both individuals and benef out of te cattency options Options ate Ike surance contact, they protect you tom the downside tthe same ime allowing you 9139 the benefits of any upc 8 ter fest n risk managemen Factors Influencing Currency Option pricesates, Treasury and Risk Management units may consider following points before trading in currency options ‘options covert beak, Messurement of Hedge ratio anc degree of isk acceprable to management Expectations and keeping rack of exchange ate movements Evaluation ang cost aenefit analysis of curency apton quates with spot rate and futures rate PRODUCT SPECIFICATIONS. ESSE Fite of Sc Pa atoare ree o Ponce TAT Ftiones by eure |ronthconsncts oe be storie eeresee the rl seceert pie Who should trade in Options? Invests belonging 10 tne following categories, depending on their financial goals and investment objectives may consider trading In options Investors who want to patcipate in he forex market without trading lor holding any currency Specutstor who have strong views on the cureney market ard ts Heedgers no wont to protec he value of tek remitance currency Option Hedging Strategies ‘A Currency option strategy for Import transactions Purchased Cal option: O» Ist August 2010, KYZ buys a USD callotion for covering is import transactions, ata stke rate of 4550. The exary date ie 3 months ve 31st October 2010 The premium is 30 pag onthe Gall Gain or hes on expry at various levels of exchange rate is demonstrates below vise payoff sable ane graph When sbot exchange rate rises above the strke price, there ae guns, tahen fll below the srke price ere are bss, which are ean tothe extent of ptemism paid 8) Currency option strategy fr Export transactions Purchased Put eption: On Ist Augus: 2010 XYZ buys a USD Put option for covering its exper wansactions, ata se rate of 45.50 The exairy date 3 months 'e 31st Getober 2010, The premium i 30 pai onthe ut. Gain oF toss on expiry at varous levels of exchange rate is emonstates below vise nay off ale ane gianh When spor exchange rate fll low the stke pica, there are guns, shen tr ses above the sre rice the ate losses, which ate maximum tothe extent of premium paidOther diferent strategies using Options: aa Proftwhen: SDN Cs Prof when: SDR rn prt hen acesel bears on nx pre when ‘vedere bill on Maxis whe: bath Prot when: WSR Mantas hen Usain goes oan & in prt he es when: USD ecete bush on Uhiy Put Opton rote wen: ores Port wnen: oreo! Los when eaeSome basic terminology croraton ate {all eptons -2he righ to buy a species cuartty ofthe enceying at fed cerecse price on or befrethe exalaton eae Put options ~ihe ight to sella specifed quanty of the underbing 2 fed rere prce on orbeforethe expraton exe Cption holder he person who suys ne ight conveyed by he opcion (Option writer i obigatedf ans when atsigned a exercise to peor accord Assigned writer = pion wier ne has been asgned an eerie is known 3s Snasgnea writer Sire price / Exercise price =i the prea which she contrat eset fs ine baer cerermnation of he amount 9 czh, fy that she option Mole IPentled wo receve uoon exer, Premium ihe pie hat the hokey of 29 option ays and he woes of an coptlon receves forthe rights conveyed bythe upon Opening Transaction: & purchase or 2 sale ransaction by which » person Closing Transaction: ansaction by which a prion reduces ot cance: aut previous porvons ether: theholseror the writer of haromton “or example ninvesor atthe same point pir to expiration may make an oberg sale ct {F entcl option he san option holder or mate an oecng purchase ot Snigetial option, Theis an option wer, Long and short ~ cong refs 1 a postion asthe holder of an option shore ‘eles toa postion asthe wie fen option, Expiration date = he doe on which the option expe Han option mas not Deen eercied upto exp ation, cates a euit aher ne exation Sate sre opts holier hallo longer have any ght ana in option, no vale European style= oatons nich may de eerie ony onthe eatin sae [Asthe money (STM) = means hat he curent markt value of he undering ie sesame asthe eetose pie fhe option Inthe money (TM) ~ A call pion I ad 2 be Inthe money ihe curent smarter vale of se uncerbing s above ihe eerie pice of the opion A But ‘olin i vid to bein the money ithe cuent market vlue ofthe ndering Sample: ne cent USDINR i 2500, JSDINRAA 0 al ike price 200), {LUSDINR #6 09 ut rice ces 4500, ar in the money. ‘Out ofthe money (OTM) - cl oon i a6 10 Be out of the money se cutest markt vale of unceying belo the exercise pice ofthe oat on Daur options sid 12 ae out of tne money the caters marl value ofthe ‘dering i above te enetcise pce othe option Example: Whe arent USDINR i 450, USDINR 45 00 all ke pie 4600) {LUSDINR 4.09 pt kre pce 4400), put ae outa the money Foreal options this he sfeence Between the vdevng eck prce ond ine sre ace For put opsons te he siference between the she ace 2nd she undehing stacks pre About National Stock Exchange: ‘he Nona Stack [change NSE) is In’ leaing stock exchange covering ‘vou cles an towne aro the county NSE wae ety dy leading intutons 1o prove a modern fly automated scien-bases tracing system wth natal tegen The fuchange hae bought about onpwalles Wansprency, specs ‘eicency safety ana mae nti sha se up eles tat serve as amodel fo SE has piyeda carl fl neforming the nian secures mare nes of ‘atest formato fechnalgy fo pvde n etcent ad avsparent adng, leaing and selement mechanism, and has wtnesed seve innovations Products & seruces vig gemutualation of ack exchange goverance ren Base vading, compression of setlemen cles, demateralsaton an econ Yapser of secuites ecules lng ans bovoning, ttesoraiaion of tading members, freanes rk management systems emergence of orn otportons to assume count’ party rks mavee? of deat ano dervatve Milestone Recopnlion arated ocanae ‘opi Maret quite] segment geese Gecae lrget eck exchange nthe county Taunch of CK Ny Comnmencenente internet Taw Cornmencenent ef Derivatives Tsdng Urn Futura) ‘Commencement of ading in neex Options TSE vnches new index derivatives Tveduction of Mini Ny derivative Thvegucen of ng em option contac ‘hunch of Seeres ening &Borowing Scheme, ‘hunch sf Gomnmencenant af Caren Fre Tag Taunch of rere Rate Fare Tauneh of Matval Fnd Sein Se Commencement a ettemert of corporate bone Taunch of Gurency tre on adonl cer PAE Taunehof fang Sng EF ‘Commencement of ding o7SUP CHEN Fes 08 OE {oisgned wth London tok exchange ® NATIONAL STOCK EXCHANGE OF INDIA LIMITED xchange na nd ul Compl Bae at Mud)