INR looks superior among emerging markets; slides on F&O expiry week

India was one of the fragile five in 2013 but they are no longer part of that group this time around because of the improved fundamentals.

There are still other emerging economies that have fundamentals that put their currencies at risk of further depreciation against the US dollar.

On a flip side, although Indian rupee looks most likely to test its recent peaks of 64.33 levels, we would not foresee any dramatic depreciation more than that level against American currency.

Earlier today the Indian rupee ended weaker at 63.5625/5725 against dollar from its previous close of 63.52/53, currently with a week's low at 64.03 on the verge of F&O contracts expiry tomorrow.

Hedge with Naked Call Writing: USD/INR

The options trader has to be extremely cautious choosing the strike price to be written as it would have a major impact on risk reward potential of the position.

If mildly bearish: If one is neutral to mildly bearish on the underlying, one would execute a premium collection strategy by writing Out-Of-The-Money naked calls.

If highly bearish: If one is bearish to very bearish, then one would write deep In-The-Money calls as an alternative to shorting the underlying stock.

The naked call write is a risky options trading strategy where the options trader sells calls against underlying currency which he does not hold.

Preferably use near month contracts.