OTC indications and options strategy:
Please be noted that the positively skewed IVs of 3m tenors signify the hedgers’ interests to bid OTM put strikes upto 0.7450 (refer above diagram).
While delta risk reversal reveals divulge more interests in hedging activities for downside risks even though we see a positive shift in hedging arrangements. As a result, we can understand ATM puts have been costlier where the spot FX market direction of this pair is heading towards 0.74-75 or below technical levels. So, the speculators and hedgers for bearish risks are advised to optimally utilize the upswings and bid on 1-3m risks reversals that would encompass Fed’s June meeting.
AUDUSD's higher IV with negative delta risk reversal can be interpreted as the opportunity for put longs as the market reckons the price has downside potential for large movement in the days to come which is resulting option holders’ on competitive advantage.
Accordingly, we had advocated put ratio back spreads a couple of days ago wherein the short leg is functioning as the underlying spot FX keeps spiking.
We advocate weighing up above aspects and uphold the same option strategy on hedging grounds, we eye on loading up with fresh vega longs for long-term hedging, more number of longs comprising of ATM instruments and ITM shorts in short term would optimize the strategy.
So, the execution of hedging positions goes this way:
Short 2w (1%) OTM put option as the underlying spot likely to spike mildly, simultaneously, go long in 1 lot of vega long in 1m ATM -0.49 delta put options and 1 lot of (1%) ITM -0.55 delta put of 2m expiry.


China’s Growth Faces Structural Challenges Amid Doubts Over Data
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts
U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift?
Geopolitical Shocks That Could Reshape Financial Markets in 2025
Macquarie Names Five Taiwan AI Stocks Set to Benefit From Data Center Growth in 2026
UBS Predicts Potential Fed Rate Cut Amid Strong US Economic Data
Cuba needs a long-term solution to its energy crisis
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty
Trump’s "Shock and Awe" Agenda: Executive Orders from Day One
Spying, Southampton and economic pressure cooker of the ‘richest match in football’
Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand
AI-Driven Memory Chip Prices May Be Skewing U.S. Inflation Data, Fed Minutes Suggest
2025 Market Outlook: Key January Events to Watch
Silver Sheds Gains in Gold’s Wake as Bears Probe Key $74.50 Support; Sell-on-Rallies Eyes $70
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 



