Currency derivatives are a contract between the seller and buyer. The value of this contract is derived from the underlying asset—the currency value. A derivative based on currency exchange rates is an agreement that the exchange of two currencies may occur on a future date at a stipulated rate.
The currency market attracts about $5.2 trillion in daily volume. It is the world’s largest market, accessible globally 24 hours a day. Besides, there is the advantage of small margin requirements and lower entry barriers. This makes it an important part of a retail investor’s portfolio. What is more? You can trade in currencies through your equity account.
Currency derivatives are also efficient risk management instruments. They offer a number of benefits.
Key Features and Benefits
- It is a new asset class for the diversification of investments for all resident Indians.
- Investments: Trade or invest in the short-term movement of markets through currency futures. Also take long-term exposures to various currencies.
- Hedging: Protect your foreign exchange exposure in business. Hedge against potential losses by taking appropriate positions.
- Arbitrage: Take advantage of currency exchange rates in different markets and different exchanges.
- Leverage: Trade in currency derivatives by paying a margin of just 3–4% of the total value instead of the full traded value.
- All of this is available across all platforms—Call and Trade through branches, as well as desktop, web, mobile, and tablet.
- Excellent research with customised service from the branch helps to drive your portfolio.