FxWirePro: Option straps on job to hedge EURAUD upside risks – hold on until expiry

Although daily prices remained well above 10 day moving average, this has not been the case with intraday charts. As we know moving average is a lagging indicator, price sentiments for now is little bullish and average curve to follow this momentum later.

Currency Option Strategy:

Our earlier recommedation on options strap are working homeward bound, please see the chart for price spikes. If any shorts or strips are open we advise those to be squared off, book the profits and for now convert the same into option straps on hedging grounds. Unlike spreads, combinations allow adding both calls and puts at a time in our strategy.

So, Buy 15D At-The-Money -0.5 delta put option and simultaneously short 2 lots of 15D At-The-Money 0.5 delta call options. It involves buying a number of ATM puts and double the number of calls. The strap is more of customized version combination and more bullish version of the common straddle.

Hence, any hedger or trader who believes the underlying currency is more likely to surge upside can go for this strategy. Maximum returns can be achievable when the underlying exchange rate makes a strong move either upwards or downwards at expiration but with greater gains to be made with an upward move. Cost of hedging would be Net Premium Paid + brokerage/commission paid.