FxWirePro: NZD/JPY short side on short put ladder serving purpose; slumps likely in medium term

The pair rallied from 81.108 to 82.19, even if it shows further upside potential we would still be safe but medium term it has to drop back. Well.., the purpose of employing shorts of (1.5%) in the money puts are serving, (see daily charts), this was recommended on 17th of this month and the chances of these shorts expiring in the money is reducing. So these shorts with reasonably shorter expiry would certainly ensure handsome yields earned on these shorts as the pair continued to rally and halting at one juncture and then our short sides would start functioning.

NZD/JPY Short Put Ladder

How was it executed: Short 7D In The Money put option and simultaneously add longs on 15D At The Money -0.51 delta put option and one more 1M OTM -0.34 delta put option.

Rationale: unlimited downside and limited upside profit potential.

What does it do with current trend: Since the short put ladder is an unrestricted return with partial risk bearing strategy that is deployed because in addition to the puzzling uptrend in short term and downtrend in long-term, we think that the NZDJPY would also perceive significant volatility in the near term.

How does it affect: Maximum loss for the short put ladder strategy is limited and occurs when NZDJPY price on expiration date is trading between the strike prices of the put options bought. At this price, while both the short put and the higher strike long put expire in the money, the short put is worth more than the long put, resulting in a loss.