Help - NSE Currency Option Trading.

#1
Hello friends,

I have been trading Nifty Options for long, but I do not have much idea about currency options. Would be obliged if you help me understand a few things regarding it. My queries:

1) Is the one NSE currency option lot 1000?

2) How does the long and short positions "work" in the Forex market http://www.nseindia.com/live_market/dynaContent/live_watch/fxTracker/optChainDataByExpDates.jsp ? I am sure this confuses many beginners. Is it same like the Nifty? Kindly explain this part by examples. :)

3) Can the position be squared off on the same day?

4) Why there is so much difference in LTP of Calls here http://www.nseindia.com/live_market/dynaContent/live_watch/fxTracker/optChainDataByExpDates.jsp ? It is fluctuating - deep in the money calls are cheap, some not so deep are expensive(!) and so on.

So far I remember only this much doubts :D, will ask more ask it comes to my mind. :)

Many thanks for your time. :)
 
#2
Hello friends,

I have been trading Nifty Options for long, but I do not have much idea about currency options. Would be obliged if you help me understand a few things regarding it. My queries:

1) Is the one NSE currency option lot 1000?

2) How does the long and short positions "work" in the Forex market http://www.nseindia.com/live_market/dynaContent/live_watch/fxTracker/optChainDataByExpDates.jsp ? I am sure this confuses many beginners. Is it same like the Nifty? Kindly explain this part by examples. :)

3) Can the position be squared off on the same day?

4) Why there is so much difference in LTP of Calls here http://www.nseindia.com/live_market/dynaContent/live_watch/fxTracker/optChainDataByExpDates.jsp ? It is fluctuating - deep in the money calls are cheap, some not so deep are expensive(!) and so on.

So far I remember only this much doubts :D, will ask more ask it comes to my mind. :)

Many thanks for your time. :)
1> YES lot size is 1000
2>with the price movement of underlying CALL AND PUT moves up and downward let you have bought 1 lot put of USDINR at the strike price of 63.50 at 0.4000 that means you assume that price of underlying which then trading at 63.50000 will fall and after some time price of underlying came at 62.9500 you will get a hand some amount as the 63.5000 put is trading now at 0.7750 but if it go opposite you will make lose say it trading at 63.8000 and ur 63.5000 put is trading now at 0.2500 then you will be in loss same will happend in case of call in opposite.
3>YES you can sq off any time when currency mkt is running
4>it deppends about the underlying and strike price and there is no proper answer regarding this closer the strike price ltp fluctuation occures more often.
 
#3
1> YES lot size is 1000
2>with the price movement of underlying CALL AND PUT moves up and downward let you have bought 1 lot put of USDINR at the strike price of 63.50 at 0.4000 that means you assume that price of underlying which then trading at 63.50000 will fall and after some time price of underlying came at 62.9500 you will get a hand some amount as the 63.5000 put is trading now at 0.7750 but if it go opposite you will make lose say it trading at 63.8000 and ur 63.5000 put is trading now at 0.2500 then you will be in loss same will happend in case of call in opposite.
3>YES you can sq off any time when currency mkt is running
4>it deppends about the underlying and strike price and there is no proper answer regarding this closer the strike price ltp fluctuation occures more often.
Massive thanks, thanks a million for this lucid reply. Second point cleared a lot of doubts :clap: . Now I understood that Calls and Puts work slightly differently in Forex (Put does Not mean currency will weaken further and vice versa). Damn! I spent a lot of time to understand this. Should have come here earlier. :)

Few more queries please.

1) Since this is Options, there is no minimum trading balance or anything such requirement like that - correct? Just need to have enough money to pay the premium, right?

2) Like in the above example you gave, if we buy 1 lot (1000) then it will cost 400 rupees (1000 x 0.4000 premium). I am right here?

Thanks :)
 

bunny

Well-Known Member
#4
"Enough money to pay the premium" is true only if you are buying options. The rules are different for writing options, because causes can be unlimited. I think you need equivalent futures margin to write one option contract.
 
#5
As both of you are currency traders, how would rate the liquidity in our markets? 1) Does all strikes have good liquidity?

2) NSE or MCX-SX which one is best for currency trading?

Thanks
 

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