In order to participate in uptrend of EURGBP which is quite uncertain, bear put spread shall be used over Protective Put as the premiums on naked puts prove too costlier. Bear Put Spread = Long ATM -0.5 delta Put + Sell another -1.5% OTM Put with lower strike price with net delta should be at -0.37.
A sharp shooting star pattern candle occurred at 0.7289 on weekly technical charts that is signifying down-streak again. This pair had taken a brief pause while a slight recovery took place from 19th August, bounces from 0.7031 (lows of 19th) to 0.7420 levels. The convergence on RSI is seen on daily charts as it is trending near 57.1700 levels with a supportive signal from stochastic curve as %D line crossover above 80 levels which indicates overbought pressure. These signals can be attributed as supportive movers for those who expect price slumps.
So when you initiate a bear put spread rather than outright purchase of a put, you are limiting your upside potential. If the asset price falls like a rock, then you aren't able to fully participate in that movement because the lower strike price put that you sold will probably be exercised, limiting your gain.
Risk/reward profile: The highest loss for this strategy is limited to extent of the net debit paid for the spread. (i.e. the premium paid for the long position less the premium received for the short position). While the highest profit is limited to the difference between the two strike prices minus the net debit paid for the position.
