An IT Company was able to hedge Long term forward contracts

An IT Company was able to hedge Long term forward contracts

07 May 2021 01:04 PM
 

CASE

Our existing client, an IT company had contracts spanned across 2 years. They had Long term exposure of USD 12 million but were unable to hedge long term forwards i.e. more than 1 year.

SOLUTION

Myforexeye used benchmark methodology with a predefined target to make the hedge decisions. When Rupee weakened to almost 75 their long term contracts were 1-1.5 Rupee in the money. So we booked forwards for 1 year and advised to roll over the contract on maturity. They earned forward premium of INR 3.5 and kept the positions hedged. This helped them to earn the premium through carrying it across years even with LTFX (Long term foreign exchange) limitations.

VALUE ADDITION

Myforexeye was able to Hedge USD 4.2 million which otherwise would've been completely unhedged if not for our advice.

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