German's ifo business climate dipped again 108.7 from previous 109.0 while forecasts were at 109.2.

This week we all have seen, although Euro areas manufacturing PMI was a upbeat number at 53.1, service PMIs were little disappointing at 53.9.

These are certainly restraining euro's growth in near future and act as hindrance for euro area as well.

Please observe the IV factor for ATM contracts with 1w-1m expiries. It has been smoothening and stagnant from last fortnight or so 12.75% to 9.6% again from 9.6% to the current 7.5%.

Simultaneously, the delta risk reversal numbers are also rising higher negative values gradually in a long run.

We can very well understand the 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.

Hence, with the current spot FX is trading at 132.305 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 to any debit put spreads.

So, the strategy goes this way, long 2 lots of 1M ATM -0.49 delta put and simultaneously short 1 lot of 2D (0.5%) ITM puts with positive theta values (use shorter expiries on short side as stated in the strategy).

Subsequently, the risk averse can even deploy option strips as well.

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.