CA
341 Points
Joined September 2007
Read it again...
You want to buy JPY after 3 months
what will you do - either Buy JPY or Sell INR
In the question, INR quote is available that why we are selling Rupee after 3 months at the strike price.
if JPY option was available, we were buying a Call option
since JPY option is not available (i.e. Rupee option is available) we are selling Rupee (selling Rupee does not mean we will short INR call) that is why we are buying INR Put option
you must be knowing that we cannot hedge by selling option, in the case of option we have to buy only (that is why INR Call is not sold (if we sell INR Call we will be exposed to the unlimited risk)), rather PUT is purchased.