I have rolled over my NZD/HKD FX contract. The contract amounts to writing a covered call option on the New Zealand dollar. Details are as follows:
1. prevailing spot rate: 6.2665
2. fixing rate: 6.2665
3. fixing date: 27 July, 2011
4. maturity date: 28 July 2011
5. implied annual interest rate: 11.4625%
6. implied conversion rate if option is exercised against me: 6.3263
If the NZD/HKD exchange rate is below the fixing rate determined on the fixing date, then I will keep my NZD and be paid interest at an annualised 11.4625%. If the NZD/HKD is above the fixing rate then I will be paid in HKD converted at the fixing rate. So long as the spot rate on maturity is less than 6.3263 then I make money.
Looking back, I realised that I forgot to post about the previous FX transaction which matured today. Oh well....