Strategy: Structures that allow clients to utilize barrier options with Step Barrier events i.e.

multiple barrier events for staggered

notional, to shrink cost and reduce the risk of losing entire hedge cover. This structure will be more receptive to risk taking clients,
who want to aggressively reduce cost by adjusting the barrier levels. Risk averse clients can be eventually pushed to explore this
post building confidence in barrier hedge given the higher degree of risk.

Rationale:
 USDINR, has traded range bound, with RBI continuously protecting the 83.30 levels, resulting in significantly lower volatility.
This provides a good opportunity to explore barrier options
 Compared to a vanilla forward, the client can look at a synthetic forward (BC+SP or BP+SC) at the same strike, clubbed with
knock-out barrier above(below) the call(put) strike
 While barrier levels with lower probability of activating are chosen, it does not completely erase the risk of a spike event that
may leave the client open to the market movement once the barrier event occurs
 To minimize the impact of being vulnerable for the entire notional at a single barrier level, client can have step barrier levels
on split notional which will reduce the risk of losing the hedge entirely

Structure For Importer: Synthetic Forward with Step Knock Out ( BC=SP= X with multiple AKO)
 For this structure, the client buys a call and sells a put at 83.28 (Spot) for a total notional of 1 Mio USD with AKO for 0.5 Mio
at 85.00 and AKO for the residual 0.5 Mio at 86.00

Structure For Exporter: Synthetic Forward with Step Knock Out ( BP=SC= X with multiple AKO)
 Similarly, for an exporter, the client buys a put and sells a call at the same strike of 83.70 with AKO for 0.5 Mio at 81.75 and
AKO for 0.5 Mio at 80.50
 In the event of an INR appreciation, the client does not run the risk of losing the entire hedge at a single barrier event

Zero Cost Structure | Spot: 83.28 | ATMF: 83.58 | Forward Point: 30 | Tenor: 3M
For 50% Notional : BC @ 83.28 and SP @ 83.28 with AKO 85.00
Structure For Importer Synthetic Forward with Step AKO
For 50% Notional : BC @ 83.28 and SP @ 83.28 with AKO 86.00
For 50% Notional : BP @ 83.70 and SC @ 83.70 with AKO 81.75
Structure For Exporter Synthetic Forward with Step AKO
For 50% Notional : BP @ 83.70 and SC @ 83.70 with AKO 80.50
Fundamental Analysis

The Greenback experiences a slight advance to the 106.30–106.40 band when tracked by the USD Index (DXY), setting aside
Monday’s negative performance as selling pressure in the US fixed-income market persists. Continuing to centre attention on
monetary policy, investors anticipate that the Federal Reserve (Fed) will uphold its position of not implementing any interest rate
adjustments throughout the remainder of the year. Meanwhile, participants in the financial markets contemplate the possibility of
the European Central Bank (ECB) halting its interest-rate policy as well, despite inflation levels surpassing the bank's target and
mounting concerns about an economic downturn or stagflation in the European region

Germany, Eurozone Economic Sentiment surprised to the upside

US Retail Sales, Industrial Production, Fedspeak will be in the limelight
The USD Index (DXY) clings to gains around the mid-106.00s

Technical Analysis

EURINR comes under some mild downside pressure and returns to the 87.80 region on Tuesday. EURINR may revisit the October
12 high at 88.50 ahead of the September 20 top of 89.07 and the noteworthy 200-day Simple Moving Average (SMA) at 90. A
break above this point could lead to an attempt to surpass the August 30 peak of 90.43 and approach the psychological milestone
of 92

As long as EURINR remains below the 200-day SMA, the potential for sustained downward pressure persist

Buy EURINR 87.70 S/L 87.30 T/P 88.50

T1 88.15
T2 88.35

Dear Team,

Strategy: Hedge structures that allow clients to exchange USD at zero cost for better strikes
Rationale:
 USDINR, has traded range bound, and held on to its levels, even with continuously increasing DXY, while, other currencies
such as JPY & EUR have been on a depreciating trend
 RBI in intervening aggressively, by selling USD, to protect the level of 83.30
 It makes sense for clients to hedge their exposure via seagull options as future currency movement might be unanticipated
in either direction
 By upgrading to seagull extra, the client gets better range of execution and strikes at the same cost

Structure For Importer: Seagull Extra (BC vanilla, SC & SP with AKI)
 Optically, the range of the seagull structure increases for the client
 For this structure, the client has an upside from 82.90 to 83.60, which increases from the ‘82.50 to 83.90’ range for a vanilla
seagull

Structure For Exporter: Seagull Extra (BP vanilla, SP & SC with AKI)
 Similarly, the range for an exporter increases from the ‘83.00 - 84.90’ range in a vanilla seagull to a range of ‘81.75 - 85.15’,
optically using barriers
 In addition, the client is receiving a better strike of ATMF on BP leg

Zero Cost Structure | Spot: 83.25 | ATMF: 83.59 | Forward Point: 34 | Tenor: 3M
Seagull BC @ ATMS SC @ 83.70 SP @ 82.90
Structure For Importer
Seagull Extra BC @ ATMS SC @ 83.60 | AKI @ 83.90 SP @ 83.00 | AKI @ 82.50
Seagull BP @ ATMS SP @ 83.00 SC @ 84.90
Structure For Exporter
Seagull Extra BP @ ATMF SP @ 83.10 | AKI @ 81.75 SC @ 83.50 | AKI @ 85.15

Also note that we need to have ISDA documents in place to execute above structure and have net worth greater than INR
5bn on standalone basis, if not done earlier.

Subject: Trade Idea - Import side structures to recoup lost ground due to higher USD/INR
Strategy: Add Knock-Out / Upside Cap to cheapen the hedging cost for Importers

Rationale:
 $INR is currently trading near all-time highs after better US ISM PMI data and not too bad labor market data. Higher
consensus on US soft landing, spike up in crude prices (13 month high currently) and slowing growth in China and Europe
is fueling USD strength (DXY = 104.85)
 RBI has been intervening heavily in the recent move up, showing their discomfort with too high a USD/INR. This is firming
the market view of USD trading in the range of 82.50-83.50 in near term with a view of 84.00 by mid of next year

Illustration:- Ref Spot: 83.13, Forward: 83.75, Tenor: 6Month

Structure #1: Knock Out Forward

o Buy Call at 82.88 ( 25 paisa below the current spot ) with an American Knock Out (AKO) at 85.50
o Sell Put at the same Strike 82.88 with an American Knock Out (AKO) at 85.50

 Client buys USD 87 paise better than Forward level, staying protected till 85.50. If the AKO Barrier is hit, entire
structure gets knocked out and client is exposed to the market
 This structure is a zero-cost structure

Premia
Structures Tenor Strategy
(INR/USD)
BC @82.88, AKO 85.50
Knockout forward with AKO 6M NIL
SP @ 82.88, AKO 85.40

Risk: If INR depreciates beyond 85.50 levels at anytime, the structure is knocked out and client is exposed to market rate
 Structure #2: Importer Seagull

 Buy Call at ATMS, Sell Call at ATMF + INR 0.50 and Sell Put at ATMS – INR 0.25
 Client is protected till 84.25 and exposed to market beyond that. Client participates in INR appreciation till 82.88

Premia
Structures Tenor Strategy
(INR/USD)
SP @ 82.88
Importer Seagull 6M BC @ 83.13 NIL
SC @ 84.25

Risk: Structure #2 – If INR depreciates beyond 84.25 levels, the client will have to pay the additional cost

Also note that we need to have ISDA documents in place to execute above structure and have net worth greater than INR
5bn on standalone basis, if not done earlier.

Kindly note that above pricing is indicative in nature and for illustration purpose only. The values are subject to market movement.