We preferred the trade idea is to be conveyed in terms of currency options instead of spot FX partially because it is looking to counteract the potential appreciation pressures on the ruble on account of a spike in crude oil prices or an acceleration of "de-dollarization" by residents.
While formulating this strategy ATM calls were deployed that evidences positive delta figures which in turn offers leveraging effect in price in future.
This latter dynamic is ultimately likely to cap any sustained sharp depreciation pressures on the ruble.
Currency Derivatives Basket:
Option Strategy: Call Ratio Calendar Spreads (USD/RUB)
Call ratio spread is recommended as the pair is likely to remain either sideways or slightly bullish in our view.
Strategy = Long far month ATM calls + Short Near month OTM calls
Buying ATM call spread in addition to selling more necked call options constitutes this hedging position. The portion should ideally be in the ratio of 1:2 or 1:3 with short time for expiry on short sides is preferred.
Breakeven will be at: short strike price + difference in strike price + net credit
We recommend adding longs on far month call ratio spreads of USD/RUB (strikes price at 55.0 and 61.0) as an attractive way to express a view of modest ruble weakening over the summer.
