FxWirePro: Diagonal straps to monitor GBP/AUD swings

Dear readers, before begin with this hedging framework let's have a glance over our previous post on the trend analysis of this pair.

Follow the link: http://www.econotimes.com/FxWirePro-Strong-GBP-AUD-bearish-signal-by-gravestone-doji-and-leading-oscillators-98418

After going through the above article, we don't think much explanation is needed if you compare the prevailing price of GBPAUD with the price on 5th October. It's now the stage of treating the disease after diagnosing. However, those who've deployed the strategy advised so as to suit the bearish signals would have derived assured returns by now.

For now, the pair has pretty much responded as per earlier analysis and we could now foresee a little bit price bounces in near term as the daily chart suggest some buying interest that would result in some price recoveries but we maintain our target at 2.1185 levels towards south.

As a result, we recommend building portfolio with longs positions in 1w 0.50 delta ATM calls and 2 lots of -0.49 delta ATM puts of 1m expiries. (For demonstrated purpose only we've used identical expiries in the diagram).

Hence, this GBPAUD option strips strategy should take care of any abrupt upswings in short term and certain downswings and yields handsome returns on the downside in long term. Delta of far OTM options is very small which is why we've chosen ATM instrument on call. A 1 point movement in underling pair will not have much effect on the option premium.