Yes you can buy a call option on the USD INR contract. Your cost will be limited to the premium paid but your profits can be unlimited on the up side once the premium cost is covered. Check the table below:

Strike

72.00

Prem

0.40

Buy Call Option

Break Even

Above 72.40

Price

Strike

Premium

Profit/Loss

ITM/OTM

Option Value

Net Profit (Value-Prem)

68.00

72.00

0.40

-4.00

OTM

0.00

-0.40

68.50

72.00

0.40

-3.50

OTM

0.00

-0.40

69.00

72.00

0.40

-3.00

OTM

0.00

-0.40

69.50

72.00

0.40

-2.50

OTM

0.00

-0.40

70.00

72.00

0.40

-2.00

OTM

0.00

-0.40

70.50

72.00

0.40

-1.50

OTM

0.00

-0.40

71.00

72.00

0.40

-1.00

OTM

0.00

-0.40

71.50

72.00

0.40

-0.50

OTM

0.00

-0.40

72.00

72.00

0.40

-

ATM

0.00

-0.40

72.50

72.00

0.40

0.50

ITM

0.50

0.10

73.00

72.00

0.40

1.00

ITM

1.00

0.60

73.50

72.00

0.40

1.50

ITM

1.50

1.10

74.00

72.00

0.40

2.00

ITM

2.00

1.60

74.50

72.00

0.40

2.50

ITM

2.50

2.10

75.00

72.00

0.40

3.00

ITM

3.00

2.60

75.50

72.00

0.40

3.50

ITM

3.50

3.10

76.00

72.00

0.40

4.00

ITM

4.00

3.60

In the above case, we have simulated the profits and losses on the call option under various price levels. We can infer the following from the above table:

· The premium of Rs.0.40 is the fixed maximum loss on the contract. That is added to the strike price of Rs.72 to arrive at your break even of Rs.72.40.

· The option is out of the money (OTM) till the exchange rate reaches 72/$. Till this point the option will be worthless and the premium of Rs.0.40 will be the maximum loss.

· The option is in the money (ITM) from Rs.72 onwards. Above that level, you either reduce your premium loss or you enhance your profits.

· Profits can be unlimited on the upside once the cost of the premium is covered and the dollar becomes stronger, your profits on the call option will keep building.

· The call option on the USD-INR is purchased either when you expect the dollar to strengthen or you expect the Indian rupee to weaken. Either ways you can profitable by purchasing a USD-INR call option.