FxWirePro: EUR/JPY straddle shorts for aggressive traders, BPS for risk averse and binary calls for speculators

As the risk appetite varies from different investors to different traders, we've customized our formulation of strategies for such varied circumstances.

Technical Purview: (EUR/JPY)

This has always been extremely tough & risky to have opened naked position on non-directional trend. EUR/JPY is now alike a non directional pattern as this pair is boiling up with lots of bearish candles, such as spinning top and candle resembling a shooting star occurred at 135.802 and 135.793 resepctively.

Currently, RSI (14) trending near 46.0360 levels with downward convergence, on closing basis movement should be closely watched if it suggests reversal signals.

Although the there is no trace of either overbought or oversold situation, it alarms bears trying to take over the rallies as the slow stochastic noises with %D line cross over around 40 levels (current %D line flashes at 42.6134).

Option trade recommendation: Naked Straddle Sale

As we foresee non-directional trend is puzzling this pair on EOD charts we like to remain in safe zone and recommend shorting a straddle, thereby, one can benefit from certain returns by shorting both calls and puts.

Short ATM put and ATM call (strikes at 135.363) simultaneously of the same expiry (preferably short term for maturity is desired).

Maximum returns for the short straddle is achieved when the EUR/JPY price on expiry is trading at around 135 levels only as both the instruments have to wipe off worthless. So that the options trader gets to keep the entire initial credit taken as profit.

However, on a long term hedging perspective, debit put spreads are advocated as the selling indications are piling up on weekly graph. So buying In-The-Money Puts and to reduce the cost of hedging by financing this long position, selling an Out-Of-The-Money put option is recommended.

But on intraday front, we suggest going for long in binary calls for a targets at 135.415, this would provide best speculating opportunity as in swing trade rallies buying interests are intensifying.