FxWirePro: Buy EUR/JPY binary puts for speculating and diagonal put spread for hedging

Greece continues to be in the limelight with today's surprising Eurogroup finance ministers meeting. The aim of the meeting is for the Eurogroup to reach a deal which can be signed by the EU leaders at the two-day summit this Thursday and Friday.

Medium term charts suggest trend for this pair has been sideways or little bearish.

We recommend buying delta binary puts of this pair for target until 138.57 with strict SL at 138.8620.

On hedging grounds the pair sense little bearish downside risks, so in order to arrest these bearish risks, diagonal spreads using In-The-Money and Out-Of-The-Money put options are advocated.

Hence, Buy 1M 0.61 delta (+1%) In-The-Money put and simultaneously (-1%) 7D Out-Of-The-Money put with positive theta of EUR/JPY.

This has been the perfect circumstance to deploy the diagonal bear put spread, because we expect EUR/JPY remains unchanged in short run and only goes down below the strike price of the put sold when the long term put expires.

In this scenario, as soon as the near month put expires worthless, the options trader can write another put and repeat this process every month until expiration of the longer term put to reduce the cost of the trade.