Subscriber 2 : ” I have observed that many of the overseas markets for Korean export goods are slowing, while the United States is experiencing a rise in Exports. Both trends can combine to possibly affect the value of the WON(KRW) relative to the US dollar. As a result, I am considering a speculative trade on the KRW/USD exchange rate. I also expect the volatility in this exchange rate to increase.”
Q. For Subscriber 2, and assuming all of the Choices relate to KRW/USD exchange rate, the best way to implement the trading Strategy would be to :
a. write a Straddle.
b. Buy a Put Option
c. use a Long NDF position
Ans. c. Long NDF postion
My doubt is since Exports to US are rising, KRW/USD should depreciate, ie, USD should depreciate wrt KRD…i.e, expecting KRW/USD rate to fall, so why isn’t the Option b. buy a put option not correct..,,Further NDF will benefit if KRW/NDF rate rises, but here it is expected to fall…..hence Why NDF is the Answer..
Thanks
I think you misunderstood the question here completely.
“the overseas markets for Korean export goods are slowing ” — exports will be less from Korea in the future , economy will suffer of Korea so KRW depreciate
“United States is experiencing a rise in Exports” — US exports is rising .. Economy GDP is expanding there is more goods being exported from US. — USD appreciate
so, KRW/USD should go long not short.
Got it thanks….