FxWirePro: Euro gains hold tight despite bearish signals - EUR/JPY straddle shorts for aggressive speculators and BPS for risk averse

The leading indicators (RSI and stochastic) suggest sideway trend in this pair, while 10 day moving average (a lagging indicator) on daily charts also signals sideway movements but it is a sell on weekly. These indications are factored in price behavior by sustaining or ready to evidence steep slumps despite bearish candle occurrences.

Option Recommendation: Naked Straddle Shorts and Debit Spreads

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

Short 7D ATM put and ATM call (strikes at 136.390) 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 136.39 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.