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Community User Posted on 05:49pm 22-Nov-2019

What is currency derivatives?

Currency Derivative is a contract between buyer & seller agreeing to exchange certain currency at a fixed price in the future date.
 
‘Derivatives’ means it derives value from underlying asset. From the point of view of currency derivatives, underlying would mean the currency exchange rate.
 
Example: When the underlying asset is an equity like ICICI Bank, the contract is termed an “equity derivative”. When the underlying is an exchange rate, like US Dollar, the contract is termed a “currency derivative”.

You can Click Here to know more about derivatives.
 
 
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Community User Posted on 11:11am 23-Nov-2019

What are the different instruments available in the currency derivatives market in India?

Future and Options are commonly used currency instruments in Indian derivatives market. A future contract allows you to buy or sell an underlying asset at a present price for delivery on a future date.
 
Options are of two types - Call and Put. Call option gives a buyer the right but not the obligation to purchase an underlying asset at the specified strike price by paying a premium while Put gives the right but not the obligation to sell an underlying asset at a specified strike price by paying the premium.
Apart from Futures and Options, Currency Swaps and Currency Forwards are other derivatives instruments used in India.

You can Click Here to know more about Future and Click Here to know more about Options.
 
 
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Community User Posted on 12:52pm 23-Nov-2019

What are the unique features of Indian currency derivative market?

Currency derivatives are the exchange-based, standardized futures and options contracts. The unique features of a currency derivatives are summarized below:
 
• Hedging tool: Currency derivatives are considered as best hedging tool for importers and exporters
 
• Smaller contract value: Small investor can enter into currency derivative contract as contract size is in the range of Rs.. 60,000/- to Rs.100,000/- for all four currency pair

• Low margin: Margins in currency derivative is normally in the range of 2% - 4% of contract value

• Low volatility: As compare to equity and commodity derivatives, currency derivatives are less volatile

• Highly liquid market: Good level of liquidity can be seen in all four currency pairs, i.e. USDINR, EURINR, GBPINR & JPYINR

• Longer contracts: In currency derivative market, twelve monthly series future contracts are available for trading

• Synchronization with forex market: Indian currency derivative market is very well interconnected with international foreign exchange market
 
You can use FuturePlus Stop Loss order on ICICIdirect to get more leverage for your intraday positions wherein you need to simultaneously place a cover order specifying the Stop Loss Trigger Price (SLTP) and a Limit Price along with a fresh order. You can Click Here to know more about Future Plus Stop Loss order.
 
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Community User Posted on 12:54pm 23-Nov-2019

What are the different currency pairs available in the Indian derivatives market?

In India, currency derivative trading is permitted in currency pair; USDINR (US Dollar), EURINR (Euro), GBPINR (Great Britain Pound) & JPYINR (Japanese Yen) and cross currency pair in EURUSD, GBPUSD and USDJPY.
 
Currency futures are available on all above currency and cross currency pairs while Currency Options are available only on USDINR, EURINR, GBPINR and JPYINR.
 
Please refer below table for more understanding on available currency pairs;
 

Currency Pair

Base Currency

Quotation Currency

USDINR

US Dollar

Indian Rupee

EURINR

Euro

Indian Rupee

GBPINR

British Pound

Indian Rupee

JPYINR

Japanese Yen

Indian Rupee

 

 
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Community User Posted on 12:56pm 23-Nov-2019

In Indian currency derivatives, are contracts available in foreign currency vs. foreign currency, for example, USD vs. Euro?

Yes. In March 2016, SEBI had allowed to introduce cross currency derivative contracts in Indian stock exchanges on EURUSD, GBPUSD and USDJPY.
 
The trading hours in such contracts are in between 9:00 AM to 7:30 PM, from Monday to Friday.
 
Please refer below table, for more detail on cross currency pairs:
 

Cross Currency Pair

Base Currency

Quotation Currency

EURUSD

Euro

US Dollar

GBPUSD

British Pound

US Dollar

USDJPY

US Dollar

Japanese Yen

 
 
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