Indian rupee came out to be the best performing currency in Asia in the month of August supported by strong dollar equity inflows of over $6.5 bn in this month so far. Moreover gain in rupee was recorded after RBI governor's statement about further room for monetary easing. The Indian Rupee gained nearly 2.40 per cent on a weekly basis to settle near its lowest level of current financial year against the US dollar. On Technical Charts, USDINR is slipped below its major long term exponential moving average (EMA) in daily chart indicating negative momentum likely to continue. For now is forming the lower top and lower bottom cycle since April 2020 on a daily chart and also place below its all major moving averages indicating bearish trend in USDINR for short term view.
On the options data front, the highest Open Interest build-up is seen in USDINR September 75.50 strike Call option to the tune of around 1.93 lakhs outstanding contracts in Open Interest, while on the flip side the maximum Open Interest build-up is seen in USDINR September 73.00 strike Put option to the tune of around 1.32 lakhs outstanding contracts in open interest.
Options data indicates support building in the 73.00 on Put based on the accumulation in open interest while on flips side resistance is seen around 75.50 on-calls based on the accumulation in open interest.
The dollar index - which gauges the dollar against six currencies, is forming the lower top and lower bottom cycle on a daily chart and also place below its all major moving averages indicating negative momentum likely to continue in near future which may help rupee to maintain strength from the lower levels against the US dollar.
Considering the overall setup, it's quite evident that The Indian rupee likely to remain bullish for short term view. We believe that “bear put spread strategy ' could be an apt strategy to trade the current setup where long positions in at the money call option can be initiated a short position in out the money Call option.
BEAR PUT SPREAD STRATEGY IN USDINR 28 SEP
LONG USDINR 73.50 PE @ 0.4450;
SHORT USDINR 72.75 PE @ 0.1625;
MAX LOSS: 28 PASIA
MAX PROFIT: 47 PAISA
PROFIT RANGE: BELOW 73.22
Note - Options premium mentioned resembles the last traded price as on august 28, 2020, for the 28 September contract.