Payoffs from Neutral Option Strategies: A Study of USD-INR Market

Abstract

Aims: The present study has tried to assess the profitability of payoffs from adopting neutral option strategies on USD-INR. Study Design: The study was carried out using daily closing values of the US Dollar-Indian Rupee current future rate available on National Stock Exchange of India (NSE) for the period starting from 29th October 2010 (the start of currency options market in NSE) to 30th June 2016. Methodology: The present study has tried to fill the gap of assessing the profitability of payoffs from adopting neutral options strategies on USD-INR. Strategies namely long and short straddle; long and short strangle were employed on USD-INR for 68 months starting from October 2010 to June 2016. Results: The payoffs are highly variable but fail to achieve any statistically significant results on the individual and comparative basis Conclusion: Results of the study are therefore significant for traders, hedgers and have academic value especially in the domain of foreign exchange neutral options strategies.