Currency Corner by Kotak Securities

03 Oct 2022 06:58

A typical butterfly betting on an upside drift in USDINR with monthly options

Currency Corner by Kotak Securities

03 Oct 2022 06:55

Butterfly and its modifications are suited for traders who can not adjust their positions everyday and on real time basis. They want to take a position and evaluate end of day, once they are back from their office or businesses.

It is a good place to start for NEW TRADERS IN USDINR OPTIONS

Currency Corner by Kotak Securities

03 Oct 2022 06:52

For monthly Option trades:

Butterfly is a nice trade.

BUTTERFLY:

BUY ATM CALL, SELL 2x OTM CALL, BUY 1x OTM call.

Max loss is capped to the premium paid.

It allows one to capture a slow upside

Currency Corner by Kotak Securities

03 Oct 2022 06:13

Implied volatility has moved up since Friday

Currency Corner by Kotak Securities

03 Oct 2022 05:33

A simple Rule of Money Management while Trading:

- DO NOT risk more than 2% of your total capital in each trade.

For example:

If you have 1 lakh as capital.

When you are taking a trade:

Sell USDINR @ 82 SL 82.20 TP 81.50 (sample trade)

Here the risk is 20 paise. Assume 5 paise slippage and cost. So total loss per dollar is 25 paise.

Therefore loss in 1 contract = 250 rupees

How many contracts to Sell?

Ans:

Max allowable loss per trade @ 2%

Max loss in rupees = 2% * 1 lakh = 2000 rupees for the trade

Loss per contract if SL gets hit = 250 rupees

Number of maximum contracts that can be traded = 2000/250 = 8 contracts.

Currency Corner by Kotak Securities

02 Oct 2022 19:12

https://twitter.com/vikas_bazaz/status/1576620912761180161?t=ASmY67lSWUBgcwEMoRdpKw&s=19

Key take aways from our telegram live with Pankaj.

Currency Corner by Kotak Securities

02 Oct 2022 15:39

We are going live at 8 tonight... See you there

Currency Corner by Kotak Securities

02 Oct 2022 07:10

See you all tonight at 8 pm.

Chai Pe Charcha, with Kotak Securities...

Telegram Live

Currency Corner by Kotak Securities

01 Oct 2022 11:30

https://economictimes.indiatimes.com/news/et-evoke/the-global-economy-is-undergoing-a-regime-change-today-india-is-the-outstanding-performer-now/articleshow/94542579.cms?from=mdr

Currency Corner by Kotak Securities

30 Sep 2022 16:34

Over this week, Indian Rupee is one of the major outperformer across a wide basket of currencies.

RBI intervention and now media chatter of Oil window has helped a lot

Currency Corner by Kotak Securities

30 Sep 2022 08:11

For June quarter, quite interesting, BOP shows, RBI buying $ in spot, USD 4.59 billion.

Inspite of FPI flows being negative for June quarter, the FDI and other flows have been quite robust.

Currency Corner by Kotak Securities

30 Sep 2022 06:35

RBI hikes rates by 50-bps.... UDINR flat

Currency Corner by Kotak Securities

30 Sep 2022 05:48

USDINR:

USDINR seems to have carved a range of 81.00 and 82.00 on the spot which can be narrowed down to 81.30 and 82.00 levels. Major central banks around the world are intervening in their bond and currency markets to support prices and governments are announcing measures to boost growth. Even though the impact on growth is a medium to long-term play, the impact on markets is immediate. Volatility remains in abundance.

Today, RBI is scheduled to present their monetary policy around 10:00 am and the consensus is for a 50 bps hike and sound slightly hawkish. KIE economist, Suvodeep Rakshit has an interesting take on it. He forecasts inflation to come down gradually as we head towards March end, towards RBI’s upper limit of 6% and this means RBI can continue to raise rates at a slower pace of 35 bps instead of 50 bps. As far as the impact of rate hikes on USDINR goes, most of the time, the impact fades with the day. There have been a few occasions in the past when RBI policy triggered a sustaining move. We do not see the impact to last longer, irrespective of whether they do 35 bps or 50 bps. But volatility is going to be definitely higher post-policy.

USDINR remains a buy near 81.20/30 levels on spot and 81.40/50 levels on futures with stops below 81.00 on the spot and 81.20 on the futures. You can opt for options on a highly volatile day, like call spreads. Naked option buy is not advised as implied volatility can fall post policy. Traders looking to sell options can focus on hedged credit strategies like iron fly or butterfly.

(Expected range for the day: 81.50-81.90. Intra-day Bias: Volatile)



GBPINR:

British Prime Minister Liz Truss and finance minister Kwasi Kwarteng will meet the head of the country's independent fiscal watchdog, OBR, today. Kwasi Kwarteng plans to announce a budget statement on Nov. 23 that will include new forecasts and detail the cost of the borrowing and measures to cut debt. Even though GBP has bounced by 800 pips from the lows but the downside risks remain. Once the short-covering lead rally gets over, weak economic fundamentals and a bloated budget can hurt the currency. There is scope to retrace most of the post-mid-September decline and touch 1.14/1.16 levels. But such a move can be a lucrative opportunity to enter fresh shorts. For the time being, GBPINR can see choppy market conditions. Focus on intra-day trading.

(Expected range for the day: 90.40-91.10. Intra-day Bias: Volatile)



EURINR:

German inflation was at its highest in more than a quarter of a century in September, driven by high energy prices. Inflation touched 10.9%. Persistently very high inflation and recessionary economic conditions are taking a toll on consumers and businesses. If energy prices remain elevated in winter, we could see deeper economic pain and even there can be a risk of socio-political unrest. Therefore, Euro remains on slippery ground. Even though ECB members have been sounding hawkish with the market now pricing a 75-bps hike in October that can hurt Euro more than help as monetary tightening will add an additional layer of pain to the EZ economy.

(Expected range for the day: 80.00-80.60. Intra-day Bias: Rangebound)



JPYINR:

Japanese authorities continue to warn speculators that further inventions are in store if JPY weakens. But as long as the macroeconomic backdrop remains as it is, USDJPY will continue to face upside pressure. Either US Fed has to temper down its future rate hikes or BOJ has to abandon its open QE lead yield curve control. But over the near term, USDJPY remains rangebound and consolidated, which means JPYINR can be driven largely by movements in USDINR. USDJPY is inversely proportional to JPYINR, whereas, USDINR is directly proportional to JPYINR.

(Expected range for the day: 56.45-56.85, Intra-day Bias: Rangebound)

Currency Corner by Kotak Securities

30 Sep 2022 04:57

GoI is clear on its stance.

We will not bend over backwards to get included. There is demand from global investors for Indian bonds, so agencies need to come mid-way

Currency Corner by Kotak Securities

29 Sep 2022 17:37

Monetary policy and currency are closely interlinked. A hawkish central bank is always supportive to local currency.

Market is going into monetary policy meeting tom with almost 50 bps hike by RBI plus a hawkish stance.

50 bps is almost baked in price. It will be central bank stance + commentary that will make the market move.

Currency Corner by Kotak Securities

03 Oct 2022 06:57

We will share a few sample butterfly and its modification trades for your understanding... 👇🏽👇🏽👇🏽

Currency Corner by Kotak Securities

03 Oct 2022 06:54

You can modify this trade in multiple ways:

You can additionally sell OTM put and buy even far out OTM put or sell far OTM call and buy even far out OTM call...

Currency Corner by Kotak Securities

03 Oct 2022 06:48

Weekly ATM vols had shot up to 8.7% in the morning from 7.5% on Friday. It is now at 8.2%. If USDINR does not blow up, then vols can cool off by EOD and straddle can see drop in premium. But maintain stops, as we do not want to be caught if USDINR breaks out above 82 spot

Currency Corner by Kotak Securities

03 Oct 2022 06:00

USDINR:

After two weeks of high volatility and upside, USDINR could be in for a week of consolidation. We could see prices testing the support zone of 80.80/81.00 on spot. On the upside, we expect the 81.85/95 zone to hold out as a near-term cap. Except for the US jobs report, there are no major economic triggers for the market. Since the Fed meeting on September 21st, Rupee has dropped in the rankings as FPIs have sold nearly USD 2 billion. FPI flows are sensitive to overall risk sentiments and hence we need to keep a close watch on risk trends like equities and EM currencies.

A rangebound price action, with the risk of an upside, this kind of market is suitable for strategies like option butterfly. In an option butterfly, you look to buy an ATM call, sell twice the quantity of OTM calls, and buy a far OTM call. Your loss is restricted to the premium paid, which is low. Loss occurs if USDINR remains below the strike where you bought the ATM call till expiry. Some traders even look to sell an OTM put option to finance the cost of the butterfly. However, the short option leg should only be done if you are highly convinced that the downside is limited.

(Expected range for the day: 81.70-82.20. Intra-day Bias: Rangebound)



GBPINR:

Rating agency Standard & Poor's cut the outlook for its AA credit rating for British sovereign debt on Friday to "negative" from "stable" as it judged Prime Minister Liz Truss's tax cut plans would cause debt to keep rising. But UK PM Liz Truss defended her plan of massive tax cuts and removal of the upper cap on bonuses. GBPUSD and the UK bond market seem to have stabilised for now, after BOE intervention. However, the backdrop remains fragile. We have seen these periods of lull before. Markets get tired of pushing the US Dollar higher and then it pauses for days to weeks, before the positioning becomes comfortable to push the USD anew. For now, GBPUSD and GBPINR could see more upside, but the structural trend remains downward.

(Expected range for the day: 90.90-91.40. Intra-day Bias: Volatile)



EURINR:

EURUSD has bounced from the low of 0.9530 to 0.9860, due to the short covering rally in most currencies against the US Dollar. With inflation in double digits, ECB is under pressure to hike by 75 bps this month. Hawkish rhetoric has helped Euro but trouble is brewing in the Italian debt market. Even though Italy has not yet announced any fiscal plan that clashes with EU objectives but the possibility of that is rising. Italian bond yields have risen far more than German yields and if the spreads continue to widen, then ECB may be forced to step in. All in all, Euro may see a near-term upside but the overall trend remains downward.

(Expected range for the day: 80.25-80.75. Intra-day Bias: Rangebound)



JPYINR:

pan spent up to a record 2.8 trillion yen ($19.7 billion) intervening in the foreign exchange market last to last week to prop up the yen. Japanese officials have warned that more interventions can occur if USDJPY refuses to come down. However, as long as the monetary divergence continues, USDJPY would continue to drift higher. JPYINR remains in rangebound price action.

(Expected range for the day: 56.60-57.00, Intra-day Bias: Rangebound)

Currency Corner by Kotak Securities

03 Oct 2022 05:20

Good morning market enthusiasts. Here's the podcast for today: https://youtu.be/5mbh7zT9oqE

Currency Corner by Kotak Securities

02 Oct 2022 19:05

Recording of the event -

Options Corner

Currency Corner by Kotak Securities

02 Oct 2022 11:42

This is a very powerful and important comment...

Very true.

It does not matter, what we think a central bank or some other player should do or what markets should do..

Only thing matters is, what they will do or what markets will do

Currency Corner by Kotak Securities

01 Oct 2022 13:03

YTD Indian equity markets remain almost the strongest market in local currency terms.

With Rupee an outperformer on YTD terms, therefore, on dollar returns as well, Indian equities are a major outperformer

Currency Corner by Kotak Securities

30 Sep 2022 16:36

Oil Window means, PSU oil companies can procure dollars directly from RBI at a specified rate and return those dollars back at a future date. This removes the demand from these players from spot market. It can be seen as an indirect intervention by RBI.

RBI has not confirmed this yet.

Currency Corner by Kotak Securities

30 Sep 2022 08:14

If you want to understand the causality, i.e, what is cause, and what is effect, then this is the way to represent BOP.

There are certain points to keep in mind:


1) Capital flows or Financial account balance, including RBI intervention, are the cause, Current account is just the resultant number. Current account is effect or dependent variable.


2) There is nothing called BOP surplus or deficit. BOP is always in balance.


Financial account + RBI intervention in spot = (- ) Current account..... This always holds as it is an accounting identity.



3) Capital Flows drive expenditure, which drives current account


4) When RBI buys dollars in spot, it is akin to capital outflow and vice versa

Currency Corner by Kotak Securities

30 Sep 2022 08:09

Balance of Payment Data from India.. Quarterly..

Currency Corner by Kotak Securities

30 Sep 2022 06:14

USDINR 7th oct, weekly IV is falling ahead of RBI. Can fall more, post RBI

Currency Corner by Kotak Securities

30 Sep 2022 05:28

Good morning market enthusiasts. Here's the podcast for today: https://youtu.be/OOxzrke241Q

Currency Corner by Kotak Securities

29 Sep 2022 17:39

USDINR--- (82.00, down 20 paise)

USDINR yo-yoed between its opening levels and yesterday’s close, as global cues oscillated between despair and hope. Over the past 24 hours, intensity and scope of interventions have increased dramatically. Central banks, along with their government are intervening to bring what they describe as normalcy. This clearly shows that markets are operating beyond the pain thresholds for many and that means, we do not want to be the ones betting on what authorities can do to bring markets back within the threshold. It is time, to sit back and re asses the paths forwards. It seems to us, that pain trade may have reached its limit for now. How long the recovery lasts, is hard to say, but we can have some time of that. Therefore, we could get a couple of days at least of recovery in risk assets and correction in the US Dollar. Having said that, we would not drop our guard as markets are in a state of shock and there are times when panic can return at short notice.

USDINR may see correction price action with 82.00 as the upper cap on spot and support levels near 81.50 levels. For fresh long positions we would wait for prices to correct near 81.50 or show evidence that it wants to consolidate at a higher level.


GBPINR--- (89.10, up 189 paise)

Global equity markets have recovered from their intra-day lows but there are still down for the day after Russia confirmed it will go ahead with annexation of four breakaway regions of Ukraine. This can lead to more sanctions and further disruptions to flows of energy from Russia. GBPUSD has rallied strongly from the intra-day lows as short cover and month end flows dominate. GBPUSD is oversold and needs a period of upward correction to get ready for its next down leg. Upside correction can take prices towards 1.14/1.15 zone, where fresh selling can be seen.


EURINR--- (79.94, up 106 paise)

EURUSD is ticking upward but much slower than GBPUSD. There is chatter about ECB activating emergency bond buying program as spreads between Italian and German yields continue to widen. EURUSD can see fresh selling near 0.99/1.00 zone.


JPYINR--- (56.85, down 14 paise)

USDJPY was rangebound for the day but rising USDINR lifted JPYINR. Over the near term, we could see more rangebound price action in JPYINR.

Currency Corner by Kotak Securities

29 Sep 2022 17:28

The link for RBI policy and presse conference:

https://twitter.com/RBI/status/1575328596951867392?t=lw9MODPyoP0inJUjLFapIQ&s=19