FxWirePro: EUR/CAD ATM delta instruments make option strips more productive

As we foresee more bearish potential on this pair huge profits achievable with the strip strategy when EURCAD exchange rate makes a strong move either upwards or downwards at expiration, with greater gains to be made with a downward move.

As the bulls could not hold trendline support at 1.4695 levels to claims more dips further. Hence, we could foresee next target at 1.4355 levels towards south.

Weights are to be more to cushion downside risks as a result, we recommend holding 15D at-the-money 0.50 delta call and simultaneously hold 2 lot of 1M at-the-money -0.50 delta put options. 

The rationale: Any potential downswings should be optimally utilized, so as to participate in that downtrend, weights in the portfolio should be doubled with ATM puts in order to give the leveraging effects. The profitability can be maximized for every shift towards downside and this is not the same on upside.

What makes ATM instrument more productive in our strategy and delta effects: The delta of this instrument is here at its fastest rate and gets faster as your position come closer to the expiration date.

As a result, time decay may have a relevant impact on ATM options. A higher absolute delta value is desirable for an option buyer.

ATM have the highest Gamma, Vega, and Theta which means their premium is the most sensitive to moves in either direction. The Delta of ATM options are 50%, which means there is an even likelihood of expiring ITM or OTM.

Accelerate profitability: Please be informed that the trader can still make money even if his anticipation goes wrong - but the underlying pair has to move in the opposite direction really fast. The 1 call bought has to beat the cost of buying all the options and still bring in some profits.