Technical Glance and Trade Tips:
Weekly technical charts that have shown continuous down-streak have now been back again. This pair had taken a brief pause while a slight recovery took place from 19th August, bounces from 0.7031 to 0.7420 levels. Intraday sentiments are bearish bias and leading indicators fortify these downswings with downward convergence. Things seem like taking track back onto its usual business on GBP side, the pair continues to flow its long lasting loses and held sturdy in near future. Even if prices remain stagnant or with brackets of 20-25 pips then a likely shooting star is certain on weekly graph.
The convergence on RSI is seen on daily charts as it is trending near 62.6612 levels with a supportive signal from stochastic curve as %D line crossover above 80 levels which is overbought zone. These signals can be attributed as supportive movers for those who expect price slumps; however closing figures on weekly chart should be crucial for long-term decision making.
We nearly replicated the short spot FX position by buying OTM puts and selling OTM calls. The net result is a virtually nil cost or even net credit trade that has uncapped risk potential as the EURGBP rises.
Why short combo: With above technical reasoning, use this strategy as EUR/GBP began a bearish environment back again and wish to earn a capital gains.
EUR/GBP spot FX is currently trading at 0.7320. Buy 1M Out of the money -0.49 delta puts (strikes 0.7352) and simultaneously sell 2% out of the money calls (strikes 0.7437) with shorter expiry, probably 10 days time frame.
Advantage: With this strategy, you use no capital and yet are able to simulate a short stock position, and the ability to leg in and leg out as you wish.
Risk/Reward Profile: The risk is uncapped if the pair rises towards north, while the reward equals lower strike plus net credit, or less net debit.
