FxWirePro: EUR/CHF IVs and risk reversals signal trend still to be in range - naked straddle shorts fetch certain yields

1W ATM of EUR/CHF is at shy below 5%. This lower IVs of ATM contracts have been lacklustre and seems like huge disparity exists between option premiums and IVs as the 1W ATM puts have been priced 23% more than NPV which in turn a cause of concern as to whether spot FX would move in sync with risk reversals or not.

Delta risk reversals of EURCHF has indicated downside risks again as it indicates puts have been relatively costlier.

This is substantiated by technicals as well, both on daily and weekly plotting, after two weeks of upswings bulls have now taken a halt as price touches at 1.1015 levels. Bearish swings are getting active to evidence the weakness at this at this stage, that is where the leading oscillators signal selling pressures.

Option trade recommendation: Strangle Shorting

Considering above OTC market and technical signals we could now foresee the slight price drops that could bring back trend in the narrow range that lasted from 9 months or so.

At current spot at 1.0971 with range bounded trend keeping in consideration we would like to remain in safe zone by achieving certain returns though shorting a strangle.

Naked Strangle Shorting

Overview: Slightly bearish in short term but sideways in medium term.

Time frame:  7 to 10 days

Short 1W OTM put (1.5% strike difference referring lower cap) and short OTM call simultaneously of the same expiry (1% strike referring upper cap) (we reiterate, preferably short term for maturity is desired).