FxWirePro: GBP/USD bears drive non-directional tend, Sterling’s tepid IVs and risk reversals to imply call writers advantage – Buy iron condor spreads

GBPUSD has been drifting in a range as shown in the daily charts, even on monthly terms price remained in the range from last 3-4 months (1.3268 - upper range and 1.2589 levels – lower range). After shooting star candle formation at 1.2916 levels, thereafter, bears have managed to slide the prices below DMAs.

Ever since then the bears attempting to maintain below 7DMAs.

Yesterday, although bulls have attempted to bounce back but again restrained below 21DMAs, as a result, you could trace out a hanging man pattern candle at 1.2928 levels, while RSI signals faded strength in previous rallies.

OTC Outlook and Options Strategy:

Please be noted that the GBPUSD's implied volatility is perceived to be comparatively minimal from other major G7 pairs (below 7.50% in 1m tenors) along with bearish neutral risk reversal sentiments, accordingly we construct multiple legs of option strategy for regular traders of this currency cross when there is little IV.

GBPUSD's lower IVs with bearish neutral delta risk reversals could be interpreted as the option writer’s opportunity in short run. Thus, exploiting on lower IVs we eye on shorting calls with shorter expiries which would lock in certain yields by initial receipts of premiums.

A total of 4 legs are involved in the condor options strategy.

Using options expiring in the same expiration month, the options trader creates an iron condor by selling a lower strike OTM put and buying an even lower strike out-of-the-money put, similarly shorting a higher strike OTM call and buying another even higher strike out-of-the-money call.

This results in a net credit to put on the trade.