IT companies are vulnerable to the foreign exchange risk as compared to other businesses, as the theme for them is outsourcing. Simply, it means earn in US $ and pay in INR. The last two years have been volatile for RE/$ equation. More imporatantly we framed a model pre 2007 and post 2007 to test whether those 8-10 factors impacted in the similar fashion or things have changed for IT companies in terms of covering their foreign exchange risk. From Naked call/ naked put to Collar formation .A lot of things changed for large companies.
We found a case where companies entered into swap agreements. We also found that few of the companies formed collar position to cover their exposure.
What we want you people to do is discuss and think how collar/ other strategies are formed and also think about swap agreements.
Friends this is one exercise which will ensure you know 30% of option strategies straight away. Right from Straddle to strangle and than collar to box.
Please note:We are in midst of releasing the case, just want to ensure we do not fall in legal tangle with the large Indian Corporate houses. ELse we would rename the companies. One exercise for all the Security analyst.
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