Since the heat news are boiling on the verge of Greece debt repayment to IMF it is sensed that all chances of dollar may look superior over Euro in medium term, thus we advise to hedge the Euro's depreciation over USD through below recommendations.
Strategic Derivatives Combinations: Option Strips (EUR/USD)
Unlike spreads, combinations allow adding both calls and puts at a time in our strategy.
It involves buying a number of ATM calls and double the number of puts.
Buy both Puts and half the number of Calls with strike = 1.0941 (i.e ATM at this juncture) to expire at the end of this week on Friday.
MT4 offers such ATM options OTCs with prefixed strikes that expire on Friday (w). The symbols for these options are C#EURUSDw+2 and P#EURUSDw+2.
The total amount to be paid on a 1 lot of call is
The total amount to be paid on a 1 lot of puts is + 894.92= 1789.84
Remember a combination this option instruments are to be of the same strike price and expiration date.
The strip is more of customized version combination and more bearish version of the common straddle.
Huge profits achievable with the strip strategy when the underlying currency exchange rate makes a strong move either upwards or downwards at expiration, with greater gains to be made with a downward move.
Hence, any hedger or trader who believes the underlying currency is more likely to plunge downside can go for this strategy.
Cost of hedging would be Net Premium Paid + brokerage/commission paid.
