We maintain medium term bearish stance on this pair, while short term upswings could also be utilized by below strategy. In our opinion, although some price recoveries that we've been seeing from last couple of weeks, weekly and monthly chart signals us the medium to long term bearish trend.

Currency Hedging Strategy: NZD/JPY Short Put Ladder

With current spot FX at 80.375 levels, the strategy takes care of hedging motives in medium term basis and short side of 1.5% ITM put option with shorter expiry is likely to mitigate any abrupt upswings in near term.

From then onwards we would await the functionality of longs on 15D ATM -0.52 delta put option and one more long position on 1M (-1.5%) OTM -0.36 delta put option.

Delta of all Out Of The Money (OTM) options will move towards zero. Therefore on expiry day the premium of all Out Of The Money options becomes zero and they expire worthless. That's why we've used lengthier expiry on OTM side.

Short Put Ladder Spread profits in all 3 directions; When the pair goes upwards (strongly or moderately), remains stagnant or goes downwards strongly. Indeed, the Short Put Ladder Spread has made profitable 4 out of 5 possible outcomes which make its probability of profit extremely high.

What does it do with current trend: Since the short put ladder is an unrestricted return with partial risk bearing strategy that is deployed because in addition to the puzzling uptrend in short term and downtrend in long-term, we think that the NZDJPY would also perceive significant volatility in the near term.