FxWirePro: More dependency on China is making ruble weaker – USD/RUB BCS for swing traders

USDRUB resumed its uptrend back again and has been continuing non-stop streak of rallies upto 69.7622 (today's highs), we project the USD to consolidate in the week ahead without significant economic events scheduled. With the last employment report before the September meeting over, we think that markets will square positions ahead of the FOMC decision on September 17. With only a one-third chance of a lift-off at that meeting, we see limited downside risks to the USD in the short term and keep our bullish medium-term view.

On the flip side, As if the falling ruble, crippling sanctions and plunging oil prices weren't a bad enough combination for Russian President Putin, now his most important ally, China, is facing serious economic problems of its own. Russian and Chinese trade relationship has dropped about 29% this year, according to investment data firm FactSet. Putin's approval ranking has been dented by a sluggish economy and free-falling ruble whose value has halved since last year due to a decline in the oil price and Western sanction over Moscow's role in the Ukraine crisis.

Trade tips:

Buy 15D (1%) in the money 0.50 delta call option while shorting 7D (1%) out of the money call option for net debit.

Why call spread: An investor with a bullish mindset often deploys this strategy and wants to capitalize on a modest advance in price of the USDRUB. If the investor's opinion is very bullish on this pair, it will generally prove more profitable to make a simple call purchase. 

Risk Reward profile: An investor will also turn to this spread when there is discomfort with either the cost of purchasing and holding the long call alone, or with the conviction of his bullish market opinion.

Maximum loss for this spread will generally occur as the underlying stock price declines below the lower strike price. If both options expire out-of-the-money with no value, the entire net debit paid for the spread will be lost. The reward is that it tends to be profitable when the USDRUB increases in price. It can be established in one transaction, but always at a debit (net cash outflow). The ITM call will always be purchased at a price greater than the offsetting premium received from writing the call with the higher strike price.