USDINR – Does a Long Call Condor make sense?

The Avg. True Range of USDINR is 1.06 with volatility coming in at 0.24. An October 62.0/62.5/63.0/63.5 Long Call Condor will allow you to bet on the Rupee staying within a range.

USDINR Long Call Condor

The market value is coming in at Rs. -155.00 but as you can see from the payoff diagram, the max profit is upwards of Rs. 500.

The Rupee will move if Rajan or Chidambaram announce something about controlling CAD or tinkering with the rates. Is Rs. 155 enough compensation for the Rajan risk?



USDINR Implied Vol vs. Realized Vol

Does implied volatility contain incremental information about future volatility? At least according to this paper, it does.

Here’s a chart that plots USDINR option implied volatility (nearest at the money) vs. futures (nearest expiry). It does appear that IV leads realized vol, but it would be interesting to see if there’s any trading edge here…

USDINR Option Implied Vol and Futures Realized Vol


USDINR – Time to sell Volatility?

USDINR Volatility

Foreign banks are offering upfront financing for wealthy non-resident Indians (NRIs) of 90% to set up dollar deposits in India following various central bank incentives, including cheap dollar/rupee swap rates and more relaxed terms on 3-5 year dollar deposits. We should see the vol collapse in the next few days. Is it time to sell USDINR volatility?

Source: Reuters


USDINR Charted

The near-term USDINR contract is currently trading at 62.8525. That’s a -1.42% swing thanks to Larry “Leisure Suit” Summers withdrawing from consideration to succeed Federal Reserve Chairman Ben Bernanke. Here’s USDINR in charts: