What are the reasons behind very few people trading USD/INR options or futures?
Also, does anyone use it for hedge? For instance, if you are short on nifty calls, will you go short on USD/INR to hedge your position?
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Maybe because of the low movement in the currency. I also did for some days but left it.
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I traded in USD/INR , i found that its very low rewarding. its not worthy to earn few hundred rupees in USD/INR trading than trading in Nifty & Bank Nifty.
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One of days, I made about Rs.200 trading with just Rs. 1000. I don’t think that is possible in nifty, banknifty. Also, selling one lot USD/INR option costs Rs. 2500 or less. So for 50k you can short about 20 (NRML) to 40 (MIS) lots in options. You can buy 100 lots, option price between 0.20 to 0.01 for Rs. 20000 to Rs. 1000 and each pip will give you Rs. 25 as profit. If you capture two pips that is a movement of 0.005 you will be in profit.
Short any option around price 0.3 to 0.5 on monday to wednesday and you are sure to make profit by 12 pm on friday.
I don’t think you can do these with nifty or banknifty.
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Hello,
I am trying to trade forex futures and want to learn more about the market. I have some question regarding volumes.
- Does volumes matter in forex (Indian markets) ? do they have any substantial impact on price action similar to stock/index futures. I have read that volumes do not matter much in forex as the transactions are huge in forex (worldwide). Is USD/INR liquid?
Can someone please answer
Thanks
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Yes volume matters in forex trading , thing is that volume in USD/INR has come down from compare to earlier/last year or so , one more thing is that you will get very high leverage but option premiums are very low , some times or many times especially in weekly options even the ITM & ATM options trade at very low premium of 0.0025 nothing but 'ZERO" so it is difficult to run any feasible option strategy but one can do " Hero or Zero ’ trading
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You mean shorting for 30 to 50 rs premium? On weekly options, 30 rs premium would be mostly at the money having delta of around 40/-40. Don’t you think that would be a risky short ?
I can say trading USD is safe compared to nifty. But you are right, it is hard to implement any strategy.
For example, if I want to trade vertical spreads, I would have 10:1 risk to reward ratio. Although probability of being right is very high, but sometimes one trade can ruin everything, right ?
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For us, small traders… USD / INR has sufficient volume. You can easily trade futures. Current week and month’s options are liquid.
Before I replied I had checked this in charts. I mean I had studied the charts. I have intraday 1 minute options data for past few weeks, I can provide it for reference. I also have some past data of one or two weeks. In general I have seen anything (CE/PE) that is in peaks by monday/tuesday loses its momentum by friday. So even if the future price is at the same price or slightly higher price than that on monday/tuesday, you will still capture time value and thus make profit. Ofcourse, the profit will not be as much but it is enough for people with conservative outlook.
0.2000 option price is Rs.200 premium and 0.0100 option price is Rs. 10 premium. For Rs. 40/50 premium you would go for 0.0400/0.0500 option price which is more sure to go to toss at expiry and likely to make more sure profit.
options price x 1000 = premium price
0.0400 x 1000 = Rs. 40
I would rather go for 0.5 or 0.7 option price because they will probably end up at 0.2 or 0.3 price at expiry.
Yes absolutely right , most of the time USD/INR trades in a range, for smaller sized accounts USD/INR trade is better.
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Trading shortguts is quite profitable in USD-INR.
Its my number 1 instrument and its only recently in August I stopped putting all my money on the pair because of FED announcement and covid related uncertainties around the wave of the moves.
Once the $ strengthens reasonably and is in equilibrium, I will look at USD-INR using full capacity.
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Well , alright , many more success to you
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August month was hard for currency traders. But how do you adjust short guts? And are you talking about weekly or monthly options? Also, do you check any fundamentals or is it only technical? I’m asking this Because currency seems your favourite instrument.
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Aug was incredibly hard for option writers in USD.
I was forced to make changes to my strategies including taking a directional bias by shorting futures and buying some far otm for cheap, as insurance.
It was for this reason I stopped monthly options completely, until it stabilises but I am taking on weekly options with lesser bias and with calculated risk.
I keep a tab on the dollar index, as well as central bank announcements in both countries and guage the movements.
Aug had less to do with fundamentals and technicals and more to do with the sentiments of seeing the DXY slip down.
What are some sources to learn these fundamentals? Can you please guide me on it? I know there is no easy and step by step guide to learn currency fundamentals but still try to share your experience and knowledge.
The only technical indicators that are useful in USDINR is pivots and Fibonacci
Rest are either very silent like the bollingers or can’t be relied upon.
When you consider trading the instrument in the start of the series, remember the futures is trading at a premium, so if you have no bias and perceive no movement for a few days, you can even do a calendar by selling front month positions little by little even if it’s going under a small loss.
The futures will definitely mellow down by mid series and if no bias remains you have earned passive income.
If you are trading options, unlike BANKNIFTY, USDINR deep itm behaves like a mini future.
So you can adjust your p/l by contra trading for short term and by hedging for the whole series.
A few months ago, China attack and Korea conflict came about the same time. My call options completely went awry.
I simply sold 75.25 ce when the futures had jumped from 75.8 to 76.4.
Two benefits-
ability to adjust short guts by either balancing it wit futures or by buying options at the same strike as it was earlier at and allowing the revolving door to lose steam.
My fundamental notion that futures is generally at a premium to the invisible spot at the start of the series.
I benefited immensely from this contra trade as the reference rate for the series ended at 75.47
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I know I am simplifying this, but by tracking unemployment, fomc data as well as RBI mpc meeting, you get a sense of forex sentiment that’s beyond trading bounds.
If the instrument has been range bound despite news, it’s time for a short term breakout that can be very telling.
Act before you react
Most traders react to the movements and its cause for sentiments to get more enhanced.
Above all, try USDINR for a few months with less capital and there’s fun to be had even if you are eventually not making much money
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Thanks for your help!
The fear of unlimited loss makes one nervous. But what I am trying to do here is be comfortable with naked USDINR trading. I know it may sound funny, but what I have decided is keeping one account for only writing naked calls and another for writing puts. This I think will let me focus more clearly [on winning or losing sides]. And also I am willing to let my account get wiped out completely.
It may take months to see results, but it is fine with me. And will definitely study the things you’ve suggested.
What I have decided is to trade short strangles of next month. And shorting far out of money calls and put whenever you see some percentage gains in options on either side.
For example, I just shorted Oct series 76 calls at 0.095 yesterday. Now if it moves against me, I will sell few more calls on higher side, if the USD declines, I will add same amount of puts having roughly same delta as the calls [10 to 20 delta].
And lets say if USD moves up, and touches 75 on the spot, I will buy weekly 76 calls for hedging. And can do same with puts.
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