Using F&O to Hedge USD-INR for Exporters

F&O
1

Hi I’m an exporter and would like to hedge the dollar so that I’m not impacted by volatility

For example today I receive an order for $1000 and will be getting the funds 2-3 month later. How do I use F&O to hedge the dollar at today’s rate so I’m not impacted if the dollar depreciates?

1 Like
2

You can use currency future or option to hedge your risk. If you are going to receive money in November month, Either you can sell November USDINR future contract today or you can buy USDINR November put option. So even if dollar depreciates you will be locking the currency rate through exchange transaction.

Example; If today you sell USDINR NOV future 1 lot at Indian currency 75 and in November month if dollar depreciates against Indian currency to 70 then you will be making Rs.5000(5*1000) in the exchange transaction which will hedge for Rs.5000 loss in physical transaction according to today’s Indian currency value against American dollar.

2 Likes
3

Thanks @Ragavendran_M

I understood the futures hedging but i was checking that buying of puts required 4 times lesser margin as compared to selling futures. Can you share an example of how I can hedge with put options for example I’m expecting $20,000.

Which is better selling futures or buying puts for hedging in my scenario?

Lastly, kite is asking to enter quantity so for $20,000 do I need to enter 20 in quantity ?

4

November month Options have zero liquidity, so Shorting November Futures will be better option.

1 Lot equals to $1000, so for $20,000 it will be 20 Lots.

2 Likes
5

@ShubhS9

If I short 20 (qty in kite) November futures at say 75 and close it at 73.

I would be only benefitting 40 rupees (20 x 2)

How will this offset the 40000 rupees received short in dollar from bank?

6

You haven’t calculated Lot Size…

This is how you calculate (Profit Rs. 2 x 20 Lots x 1000 Lot Size) = Rs. 40,000.

7

Just 3 days ago, I bought 50 lots of USDINR FUT (Expiry January Month) at 76.0600 Rs and Now, It is going 73.7600 Rs with the loss of 15000Rs.
I am just new in F&O and not have so much idea about it. Please help me, How should I handle this situation? I’ll be highly grateful to you.

@ShubhS9 @Ragavendran_M