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Market Intelligence › Basic Terminologies
The structure of exchange-traded currency derivatives and their use cases
Published by The Retail Trader · JUL 30, 2026 · Derivatives & Commodities
Futures and options on currency pairs trade on the exchange. Here you take a position on the price of one currency against another, and it is settled in cash.
Most of the activity is in pairs against the rupee. The contract size is standardised and the price is quoted to about four decimal places, so the tick value is small.
Trading hours differ from equity, because the currency market is global.
This market is used for two completely different purposes:
• Hedging — those whose income or expense is in foreign currency can fix their exposure.
• Speculation — those who are only taking a view on the movement of the currency.
• For hedgers, the size is set by their actual exposure, not by a view.
• Cross currency pairs are also available, in which the rupee is not involved at all.
A currency's daily move is much smaller than equity's, so people take far too much leverage in it. Small volatility does not mean low risk — with a large size, even that small move can do just as much damage.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed by the exchanges, SEBI and RBI from time to time, so verify every number yourself with your broker or the official source.