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Futures & Options A HedgingTool

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A futures contract is a standardized contract, traded on an exchange, to buy

or sell a certain underlying asset or an instrument at a certain date in thefuture, at a specified price.

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What is an Option?

A Currency Option is an option, but not an obligation to buy or sellcurrency during a specified time period at a specified price

The price or value of the option is called the premium

Two different Options:

1. Call Option2. Put Option

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What is a Call -and a Put Option?

A currency Call option is an option but not an obligation to buy currencyduring a specified time period at a specified price

A currency Put option is an option but not an obligation to sell currency

during a specified time period at a specified price

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Product Features

Minimum Amount Required to open an account is Rs. 10,000 Now Terminal will be available for online trading Trading in Currency options are also available Tick size is 0.0025

1 lot = 1000 units

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Margin Detail

Currencies traded Lot size *Margin % CMP Liquid contracts Margin Amount

USD - INR 1000 2.27% 44.73 May,June 1015.371

GBP - INR 1000 2.50% 73.9 May,June 1847.5

EUR - INR 1000 2.34% 66.45 May,June 1554.93

JPY - INR 100000 3.81% 0.5555 May,June 2116.455

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Difference between forward & Future contracts:

Forward Contracts Future Contracts

Forward contracts are private and custom madeagreements between banks and and its clients (MNCs,exporters, importers, etc.) are not as rigid in their statedterms and conditions.

Future Contracts are exchange-traded and, therefore, arestandardized contracts. Its being traded on NSE,MCX andUSE platform

No marked to market is debited on daily basisFutures contracts are marked-to-market daily, whichmeans that daily changes are settled day by day until theend of the contract.

High commission is charged by bank for this transaction Lesser brokerage is charged on hedging or speculation bybrokers

No market accessibility Global accessibility to the market on terminal provided by theexchanges

Most of forward contracts are settled with delivery orreceipt of the asset

All futures contracts are settled using cash, NOT thedelivery of the commodity/asset.

Usually no initial payment is required. This contract iscustomized to the needs of the customers.

Initial margin payment is needed. This contract isstandardized to the needs of the customers.

Once the contract has been made, it is very difficult toundo it till the expiry date is over.

Client can square off his position anytime before the expiry ofcontract

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Example of Forward and Future Contract :Eg. :USDINR Spot rate : 46.00 Forward rate :Feb : 46.2032 46.2181Mar : 46.4525 46.4725Apr : 46.73 46.75

Future rate :Feb : 46.21 46.2125Mar : 46.45 46.4525Apr : 46.72-46.7225

If client wants to buy one lot then gain\Loss as per below mentioned contracts will be :

Forward Price Future Price Brokerage @ 3% Future price Min brokeragecharged

Difference(Forward price Future price)

Differenceper 1000lots in Rs.

46.2181 46.2125 0.004621 46.22 0.01 -0.00440 -4.446.4725 46.4525 0.004645 46.46 0.01 0.01000 10

46.75 46.7225 0.004672 46.73 0.01 0.01750 17.5

If client wants to sell one lot then gain\Loss as per below mentioned contracts will be :

Forward Price Future Price Brokerage @ 3% Future price Min brokeragecharged

Difference(Forward price Future price)

Difference per1000 lots

46.2032 46.21 0.004621 46.22 0.01 -0.01680 -16.8

46.4525 46.45 0.004645 46.46 0.01 -0.00750 -7.5

46.73 46.72 0.004672 46.73 0.01 0.00000 0