FxWirePro: EUR/CAD lower channel provides strong support - straps to hedge uptrend participation

The pair has taken support at channel line 1.4800 which is quite reasonable as it was a steep spike and fall, we had earlier traced out an inverted hammer pattern candle at 1.4716 levels which is to be considered as a caution of either probable reversal upward or continuation of upswings and now look at what has been happened. We believe if it holds on weekly basis then healthy bounce back may happen otherwise the declines until 1.4373 is possible (i.e. previous channel distance).

If you think Euro to spike up against Canadian dollar as it took support at lower channel line and heading towards the target at 1.5005 levels, then cover your underlying currency exposures with option straps strategy.

This strategy is for those who have Euro exposure at present who are concerned about both slight correction as well as surge handsome and wish to hedge the long spot currency position. So, how do you do that? the hedger takes following positions to construct this strategy:

So, Buy 15D At-The-Money delta put option and simultaneously buy 2 lots of 15D At-The-Money delta call options. The strap is more of customized edition of combination and more bullish version of the common straddle.

Hence, any hedger or trader who believes EURCAD is more likely to surge upside can go for this strategy. Maximum returns can be achievable when the underlying exchange rate makes a strong move either upwards or downwards at expiration but with greater gains to be made with an upward move. Cost of hedging would be Net Premium Paid + brokerage/commission paid.