As you can observe from the diagram the implied volatility for near month at the money contracts of this APAC pair has been highest among G20 currency pool after EURUSD and is seen 11.5% for 1w expiry.
While delta risk reversal reveals downside hedging activity has been piling up. As a result we can understand ATM puts have been costlier where the FX market direction of this is heading towards 0.7007 technical levels.
The OTC options market appeared to be more balanced on the direction for the pair over the 1m to 1y time horizon and as a result delta risk reversal for AUDUSD has been maintaining negative which means puts are in higher demand and overpriced comparatively.
Hence, AUDUSD's higher IV with negative delta risk reversal can be interpreted as the market reckons the price has downside potential for large movement which is resulting derivatives instruments for downside risks have been overpriced and fresh shorts are more on the cards.
As shown in the diagram, contemplating the above risk reversal computations, we construct strategy comprising of ATM and OTM puts in the ratio of 2:1 so as to suit the swings on either directions.
As we expect upswings in short term, Capitalizing on higher IV we eye on shorting at the money puts with shorter expiries which would lock in certain yields by initial receipts of premiums.
Simultaneously, 2 lots of ITM -0.50 delta puts are preferred to suit the prevailing losing streaks. So thereby the combination would be executed for net debit and the cost is reduced by short side.


FxWirePro- Major Pair levels and bias summary
FxWirePro: USD/JPY edges higher as traders monitor Middle East developments
FxWirePro: EUR/ NZD gains some upside momentum ahead of RBNZ decision
FxWirePro: GBP/USD eases slightly as Iran deal proves elusive
Bitcoin Pares Gains on US-Iran Tensions; Mixed EMA Setup Puts $74K Support on Watch
FxWirePro: USD/CNY edges higher as market sentiment turns cautious
AUDJPY Pares Gains as Soft Australian CPI Cools Rally; Bulls Circle Key Dip-Buying Zone at 113.40
Ether Breaks Below $2,100: Triple EMA “Sell-the-Rally” Setup Targets $1,900
GBPJPY Coils in Tight Range Above Bullish EMA Stack; Dip Buyers Target 216–217 Breakout
NZD/JPY: Triple EMA “Sell-the-Rally” Setup Targets 90 as Bearish ADX Strength Doubles
FxWirePro: USD/ZAR gains some ground but outlook is bearish
FxWirePro: USD/CAD remains buoyant, upside pressure builds
FxWirePro- Woodies pivot (Major)
GBP/JPY Breakout Blitz: Triple EMA “Buy-the-Dip” Setup Eyes 216–217 as Yen Momentum Crumbles
FxWirePro: AUD/USD eases as US-Iran questions mount
FxWirePro: NZD/USD spikes as RBNZ holds rates in split decision
FxWirePro: GBP/NZD advances as kiwi weakens ahead of RBNZ decision




