Please observe the IV factor for ATM contracts with 1w expiries. It is taking off from last week's 8% to a steep jump at 12.75% ahead of ECB meet today.

On the flip side, as shown in the diagrammatic representation EURJPY ATM puts are priced 12.01% and ATM calls trading 12.27% more than NPV which would mean that, synchronizing IV factors with these options pricing in order to generate the positive cash flows on either side, OTC markets are moving in tandem with market sentiments.

There exist the 12.75% probabilities of ATM instruments to expire in the money.

Hence, we believe there exists no disparity between vols and premiums and accordingly Put Ratio back Spread strategy is on competitive advantage than naked contracts through option writings.

Alternatively, risk averse can even deploy option strips as well.

The delta risk reversal numbers are also getting higher negative values gradually in a long run (flashing at -0.25 for 1 week expiries).

Hedging activities of downside risks are mounting up, as a result Put options seem costlier.

Volatility smiles most frequently tells that traders are willing to pay higher implied volatility prices as the strike price grows aggressively out of the money.

The current spot FX is trading at 130.748 and we will continue to remain bearish with near targets extending dips up to 131.035 and then 129.50 levels.

So, the recommendation for now is to add an extra long on put with 1M expiry any debit put spreads.

Strategy goes this way, Long 2 lots of 1M ATM -0.49 delta put and simultaneously short 1 lot of 3D (0.5%) ITM puts with positive theta values (for demonstration purposes only we've used identical expiries, use shorter expiries on short side).

With these narrow strike differences, the profit potential is greater, so that the ratio needed is also lower to profit on underlying movement.

Caution: If you think the pair is going to crash, you should be loading up on put buys in existing strategy. The total cost of the trade is going to be the difference between the prices of the two options. (Compare total cost with strips which involves 3 long sides whereas backspreads have 2 but then caps both directions when IV is increasing).