What are Currency Derivatives?


Currency derivatives are contracts traded on exchanges that derives their value from underlying assets, i.e. Currency. In these contracts, investors can either buy or sell specific units of a fixed currency at a predetermined date and rate. These contracts are based on currency pairs such as USDINR, EURINR, JPYINR, or GBPINR, rather than the individual stocks.


Four commonly paired Currency pairs are:

  • USD - INR
  • EUR - INR
  • JPY - INR
  • GBP - INR


Lot size of Currency Pairs

CONTRACTLOT SIZE
USDINR1 unit denotes 1000 $ (Dollar)
EURINR
1 unit denotes 1000  (Euro)
GBPINR1 unit denotes 1000 £ (Pound Sterling) 
JPYINR
1 unit denotes 100,000 ¥ (Yen)


Types of  Currency Derivatives 


Currency Futures: It is a financial contract that allows you to buy or sell a specific currency at a predetermined price on a specified future date. They operate similarly to stock futures, but involve currency pairs such as USDINR, EURINR, JPYINR or GBPINR instead of individual stocks.


Currency Options: It is a financial contract that provides the buyer the right but not the obligation to buy (call option) or sell (put option) a specific currency at a predetermined price within a specified period. Unlike currency futures, options offer flexibility. Traders can choose whether or not to exercise their right to trade the underlying currency.



Cross Currency Futures and Options contracts for trading are offered on major currency pairs EUR-USD, GBP-USD, and USD-JPY.

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