Please be noted that the 1w implied volatilities of ATM puts, the IVs of this pair is at 22.91%.

2W to 1M expiries are trending above 20.7% and 21.21% respectively, while OTM skewness in these IVs signals more likelihood of these options expiring in the money.

So, gamma on these OTM strikes to move with a rapid pace that results in healthy delta as well, but %change in option price is ticking negative figures as the pair evidencing upswings for the day.

You can also observe IVs of 1W expiries have reduced a bit, thus this could be interpreted as the right time and right opportunity to deploy shorts in put ladders used as a hedging strategy.

What is weighing on the pound's slumps is that, UK central bank (BoE) maintained their “Status Quo” in their recent monetary policy review and changed guidance for rate cut probabilities in next monetary policies amid lingering risks of Brexit outcome that adds an extra pressure on sterling's depreciation.

As a result, even during long tenors (2M-1Y) IVs are likely to spike 15% and above on account of the formal Brexit settlements.

Hedging Strategy:

So, on hedging grounds initiate longs on 2 lots of puts with 3m tenors while writing an in the money put with shorter expiry (preferably 1W expiries).

i.e. 1 lot of 3M At-The-Money -0.49 delta put and 1 lot of 3M (1%) out of the money -0.36 delta put that would function effectively in considerably higher IV times (see sensitivity table for higher probabilities and stabilized Vega growth).

Simultaneously, deploy shorts side of 1 lot of 1w (1%) ITM put option. The net delta should be around 43% and the positions could be entered with reduced debit.

Maximum return is limited to the extent of initial credit received if the underlying spot FX price keeps rallying above the upper break-even point (i.e. approx. 131.860) but large unlimited profit can be achieved should the spot FX price makes a dramatic move to the downside below the lower break-even point (i.e. approx. 130.604).

Please be noted that the strikes and tenors shown in the diagram are for demonstration purpose only, use accurate inputs as suitable to your requirements.