We entered a USDINR 63.5/65 Bull Spread today. Basically you buy the ITM call and sell the OTM strike – cheaper than buying a call outright.
The trade has a max payoff of Rs. 955 and costs around Rs. 565 to put on. Here’s how the pay-off looks like:
The break-even is around 64 – basically the Rupee has to trade above that. But since we sold the 65 call, our returns are capped if the Rupee depreciates below 65 anytime soon. Novembers were last trading at 64.02 (+0.34)
We had discussed a USDINR Condor before where we were betting on range-bound behavior… and it didn’t quite end well. Hopefully the setup works better this time… fingers crossed!
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