FxWirePro: EUR/AUD digital calls for swing trade and option Strips for hedging

For intraday trading perspective, buying ATM binary calls may fetch around yields of 20-25 pips with ease as leading oscillators converging rising prices. RSI trending near 41.7829 with upward convergence, while %K line crossover on slow stochastic at around 42.9032 signifies buying momentum is continuing.

But as it is sensed that all chances of Aussie dollar looking superior over Euro in medium term future, we advise to hedge the Euro's depreciation over AUD through below recommendations.

Option Strategy: Option Strips (EURAUD)

We've been firm to hold on this strategy on hedging grounds, unlike spreads, combinations allow adding both calls and puts at a time in our strategy.

The strip is more of customized version combination and more bearish version of the common straddle.

It involves buying a number of ATM calls and double the number of puts.

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.

Hence, 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.