NSE has introduced weekly futures for USD-INR currency pairs. Trading in these futures will start from 11 October 2021. It’s a part of this bourse’s plan to develop many derivatives for trading and provide players with hedging options. Coming up is a rundown of the entire story.
Key Highlights from NSE’s Announcement to Trade-In Weekly Futures
- National Stock Exchange introduced a USD-INR weekly futures instrument to complement the already existing weekly options.
- Weekly futures will expire on the following Friday at 12:30 pm.
- Eleven serial weekly futures will be available for trading except on the expiry week of a monthly contract.
- Moreover, the size of this contract will be USD 1000.
- It will be available for trading in the currency derivatives of the Exchange.
Earlier, NSE had introduced weekly options for a USD-INR pair around 3 December 2018. There are several explanations to rationalise this move. A few expositions are as follows:
- Traders will now have a low cost transacting instrument.
- Moreover, they can take advantage of the short-term market movements because of government policies, international news, etc.
- They will be gaining from the limited time-related premiums. Therefore, the move offers short-term portfolio protection at a very low cost.
There have already been monthly futures existing in the NSE, and the weekly futures look to complement these. Market players should be expectant of the short-term tool and the hedging option that it allows them. Moreover, capitalising on international market movements is also a significant plus for the move.
Frequently Asked Questions
- What are futures?
Futures are financial derivative contracts, that ‘force’ or hold accountable two agreeing parties to transact some assets at a predetermined rate and at some future date rather than at the current market price. Futures are used for trade speculation and hedging.
- What are weekly futures?
Weekly futures are those where the contract lasts only for a week. The contract duration starts on a Thursday and then expires 8 days later on a Friday.
- What is the daily annual turnover in futures and options since the introduction of the options back in December?
Daily average turnover in USD-INR derivatives has increased from Rs. 17,011 crores in FY21 to Rs. 19,007 crores in FY22.
- When do futures expire in India?
Futures contract expire on the last Thursday of the expiry month. If that happens to be a trading holiday, then the futures contract expires the previous day.