Strategies with FX Derivatives
| Type of strategy | Description |
|---|---|
| Hedging risks against rouble decline | Foreign investors who buy Russian issuers securities for roubles or companies borrowing in US dollars may find futures and options on USD/RUB exchange rate rather useful in securing against rouble depreciation. You can hedge against the rouble exchange rate decline buying futures or Call options |
| Hedging cash flow against rouble appreciation | Russian market participants engaged in foreign economic activity can hedge cash flow in foreign currency from rouble appreciation through selling futures or buying Put options |
| Trading with leverage on exchange rate fluctuations | Futures and options on USD/RUB may be a perfect financial instrument for trading on USD appreciation or deprivation against the Russian rouble providing a comprehensive leverage for this. The "leverage" on transactions with futures is 1:33 (the initial margin is about 3% of the futures contract price) |
| Short sell | USD futures and options give an opportunity for market participants to sell the contract even if they do not have American currency in their portfolio |
| REPO transactions in foreign currency | The combination of transactions - selling dollars on the spot market and buying futures contracts - resembles the direct REPO when a market participant takes loan secured by currency. On the contrary, buying dollars on the spot market and selling futures can be considered a reverse REPO when a market participant lends money secured by dollars. The loan term equals to the period before the futures settlement |
| Cross market arbitrage | Apart from Russian exchanges futures and options on USD/RUB are actively traded on the Chicago Mercantile Exchange (CME). The availability of USD/RUB futures and options on the several exchanges with the same contract features let participants receive risk-free arbitrage profit |
| Futures and options combination | Combining various USD/RUB futures and options you can create complex speculative or arbitrage strategies. |