FxWirePro: Capitalize on interim rallies of GBP/CAD to construct “Credit Put Spreads” to derive yields regardless of swings

FX Option Strategy:

Here comes the right option strategy to tackle puzzling swings of GBPCAD, “put spread” constructed at net credits, buy mid-month +1% Out of the money -0.37 delta put option, simultaneously, short 1W (-1%) in the money put with positive theta.

Please be noted that in this instance, the put we bought is out of the money with longer tenors and the put we short is in the money and with shorter tenors, an anticipation of GBPCAD could rise or remain unchanged would ensure the yields on short side, and there onwards any risks of abrupt fall would be mitigated by longs in OTM put and your active longs in spot FX would be protected.

Since last two weeks, GBPCAD is showing some sort of negligible gains but eventually they shouldn’t be neglected instead they could be optimally utilized as the skewness in 1m IVs signifies the holders of OTM puts are on upper hand and theta at this juncture are at higher levels.

There, any abrupt upswings are most likely to wipe off the premiums on ITM shorts and on in contrast if underlying keep dropping the longs give you the safeguard for the slumps..

Maximum profit: The initial credit received for this trade, less commission costs.

The maximum risk is the difference between the two strike prices, minus the credit you received.