Trading perspectives:
From last fortnight or so we've been advocating bearish strategies, we hope regular traders whose portfolios derived profits from such bear trend of this pair can accumulate fresh short build ups to their existing portfolio.
We could now foresee some more downside pressure after marginal upswings. Although there is no trace of drastic movements on either side we still sense some sort of bearish view as we found Doji and spinning top candles when we plot daily charts and RSI curve is converging falling prices both on EOD and weekly charts.
Hence, on hedging perspectives, with an anticipation of little downward sentiments we like to build option strips.
Buy 7D At-The-Money 0.40 delta call option and simultaneously short 2 lots of 7D At-The-Money -0.50 delta put options for a net debit.
Since it involves both buying a number of ATM calls and double the number of puts, it does not mean that it's a trade gamble as we have positions on either side. The strip is more of customized version combination and more bearish version of the common straddle. Preferring slightly lesser delta over delta on put side would mean that the smaller underlying outrights on long side comparatively with shorts.
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.
Thus, 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.
