FxWirePro: GBP/AUD lingering trendline – credit put spread for swing trading

Currently GBPAUD is holding trendline at 2.1836 on weekly graph, although RSI has reached overbought region but signals indecision about direction and there was no substantiation by other indicators also. We believe GBPAUD uptrend has been quite healthy as the upswings are moving with considerable corrections at the right time, it has neither been steep spikes nor steep declines and you can make this out from daily charts as the oscillating indicators are also positively converging with price spikes and dips. Current 10 day moving average is evidencing long term uptrend remains intact.

With reduced implied volatility of ATM options, it is quite riskier to build strategy with more number of shorts. Moreover, the pair has already rallied onto 2.2370 levels, so it is advisable to build portfolio with credit put spread at this point in time.

Well, here goes the strategy this way, buy 15D (-1%) OTM -0.42 delta put instrument, simultaneously short 7D (2%) ITM put with positive theta. The combined delta of this strategy should be at around positive 0.45. The delta is positive because the position is bullish.

The Delta is at its highest speed when GBPAUD is between the two strike prices or when options get closer to the expiration date.