FxWirePro: NZDUSD calendar combination for hedging on 1M HY vols

The pair is holding 6 years lows of NZD/USD as inverted hammer pattern candle that was occurred on weekly chart exactly at 0.6572. RSI is converging to boost up rising prices (current RSI is trending at 40.0054) while %K line crossover near 20 levels signifies oversold pressures.

Hedging framework:

When all eyes tend to drag this currency towards further slumps, on a long term perspective, contemplating the above critical support we build neutral calendar spread on this pair.

As the volatility   near month ATM contracts of NZD/USD ATM contracts is perceived at 13.24% which is quite on higher sides deploying customized calendar combination using ATM call options at current juncture is more suitable considering above technical reasoning. The options trader constructs this strategy being bullish in the short term and is shorting the near month OTM put contracts with the intention to ride the short term calls for free. So buying 1M ATM delta call would be reduced its cost while shorting 7D (-1%) OTM puts.

Once the near month options expire worthless, this strategy turns into a discounted long call strategy and so the upside profit potential for the bull calendar combination becomes unlimited. The maximum loss happens when the NZDUSD dips continues and stays down below OTM prices until expiration.