They are scraps of conversations on synthetic foreign currency derivatives , wafting across bank dealing rooms and corporate treasuries grappling with a volatile rupee and unsettling headlines. Tarfs offers a cheaper rate at which an importer could buy dollars or a higher exchange rate at which an exporter could sell dollars than the prevailing rate in a simple forwards contract. Buying call means the 'right' to buy dollars at the strike rate; selling call means the 'obligation' or compulsion to sell dollars at another strike rate; and, selling put means the obligation to buy dollars at yet another rate. Though cost-effective for an importer who is able to fix the upper rate at which it can buy dollars, the gains are frozen beyond a point. Also, the importer would be obliged to buy dollars (thanks to selling a call) even if the dollar depreciates below its expectations.
