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Currency Options

Currency Options are powerful hedging tools for corporates and SMEs. This product also gives ample opportunities to traders and investors. Currency Options on USE brings to you all this plus the added benefits of trading on a secure, robust, transparent medium that aids in efficient price discovery.

US Dollar - Rupee Currency Options Contract

 

Symbol USDOPT
Instrument Type OPTCUR
Size of Contract
1 contract is for 1000 USD (Lot size)
Underlying US Dollar - Indian Rupee spot rate
Quotation
Premium in Rupee terms. Outstanding position in USD terms
Type of option
Premium styled European Call and Put options
Tick size 0.25 paisa or INR 0.0025
Trading hours Monday to Friday ( 9:00 a.m. to 5:00 p.m. )
Available contracts
Three serial monthly contracts followed by three quarterly contracts of the cycle March/June/September/December

Last trading day

Two working days prior to the last business day of the expiry month at 12 noon.
Strike price
Minimum of twelve in-the-money, twelve out-of the-money and one near-the-money strikes would be provided for all available contracts
Strike interval
25 paise or INR 0.25

 

Final settlement day

Last working day (excluding Saturdays) of the expiry month. The last working day would be taken to be the same as that for Interbank Settlements in Mumbai. The rules for Interbank Settlements, including those for ‘known holidays’ and ‘subsequently declared holiday’ would be those as laid down by FEDAI.
Exercise at Expiry
On expiry date, all open long in-the-money contracts, on a particular strike of a series, at the close of trading hours would be automatically exercised at the final settlement price and assigned
on a random basis to the open short positions of the same strike and series
Position limits *
Clients

Trading Members

Banks Clearing Member Level
Lower of 6% of total open interest or USD 10 million across all contracts (both futures and options)
Lower of 15% of the total open interest or USD 50 million across all contracts (both futures and options) Lower of 15% of the total open interest or USD 100 million across all contracts (both futures and options) The clearing member shall ensure that his own trading position and the positions of each trading member clearing through him is within the limits specified here
Initial margin * The Initial Margin requirement would be based on a worst scenario loss of a portfolio of an individual client comprising his positions in options and futures contracts on the same underlying across different maturities and across various scenarios of price and volatility changes. In order to achieve this, the price range for generating the scenarios would be 3.5 standard deviation and volatility range for generating the scenarios would be 3%. The sigma would be calculated using the methodology specified for currency futures in SEBI circular no. SEBI/DNPD/Cir-38/2008 dated August 06, 2008 and would be the standard deviation of daily logarithmic returns of USD-INR futures price. For the purpose of calculation of option values, Black-Scholes pricing model would be used. The initial margin would be deducted from the liquid net worth of the clearing member on an online, real time basis.
Extreme loss margin * Extreme loss margin equal to 1.5% of the Notional Value of the open short option position would be deducted from the liquid assets of the clearing member on an on line, real time basis. Notional Value would be calculated on the basis of the latest available Reserve Bank Reference Rate for USD-INR
Calendar spreads # A long currency option position at one maturity and a short option position at a different maturity in the same series, both having the same strike price would be treated as a calendar spread. The margin for options calendar spread would be the same as specified for USD-INR currency futures calendar spread. The margin would be calculated on the basis of delta of the portfolio in each month. A portfolio consisting of a near month option with a delta of 100 and a far month option with a delta of – 100 would bear a spread charge equal to the spread charge for a
portfolio which is long 100 near month currency futures and short 100 far month currency futures. 
Net Option Value
The Net Option Value is the current market value of the option times the number of options (positive for long options and negative for short options) in the portfolio. The Net Option Value would be added to the Liquid Net Worth of the clearing member. Thus, mark to market gains and losses would not be settled in cash for options positions.
Settlement of Premium
Premium would be paid in by the buyer in cash and paid out to the seller in cash on T+1 day. Until the buyer pays in the premium, the premium due shall be deducted from the available Liquid Net Worth on a real time basis.
Mode of settlement Cash settled in Indian Rupees

 

* Since Revised, refer Circular (circular - USE/SURV/335/2013) 

# Since Revised, refer Circular  (circular - ICCL/USE/8/2013)


 

 

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