Menu

Search

  |   Technicals

Menu

  |   Technicals

Search

FxWirePro: EUR/GBP option trade ideas - deploy short combinations on rallies

The objective of profit maximization can even be attained formulating EURGBP options combinations if you think you are running short of capital exposure for spot FX shorting, well.., you can very well do the same utilizing derivative combinations (both call and put) so as to leverage extraction. We nearly replicated the short spot FX position by buying OTM puts and selling OTM calls. The net result is a virtually nil cost or even net credit trade that has uncapped risk potential as the EURGBP rises.

Technical Roundup:

Long term technical charts do neither trace any clear buying signals nor even selling calls at all. But contemplating the previous long term trend, we think this pair had taken a brief pause while a slight recovery took place from mid July, bounces from 0.6935 to 0.7420 levels. Things seem like taking track back onto its usual business on GBP side, the pair continues to flow its long lasting loses and held sturdy in near future.

EUR/GBP spot FX is currently trading at 0.7274. Buy 2M 2% out of the money -0.49 delta puts and simultaneously sell 2% out of the money calls  with comparatively shorter expiry (probably 7, 10 or 15 days time frame as suitable conditions).

With above technical reasoning, use this strategy as EUR/GBP long term bearish environment holing strong despite intermediate attempts of bulls taking over rallies and wish to earn capital gains.

Advantage: With this strategy, you use no capital or negligible capital and yet are able to simulate a short spot FX position, and the ability to leg in and leg out as you wish.

Risk/Reward Profile: The risk is uncapped if the pair rises towards north, while the reward equals lower strike plus net credit, or less net debit.

  • Market Data
Close

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.