FxWirePro: Option strips better for AUD’s appreciation over EUR

As it is sensed that Aussie dollar may attempting to look superior over Euro in short term future, we advise to hedge the Euro's depreciation over AUD through below recommendations.

Option Strategy: Option Strips (EURAUD)

The strip is more of customized version combination and more bearish version of the common straddle.

Unlike spreads, combinations allow adding both calls and puts at a time in our strategy.

It involves buying a number of near month ATM calls (strikes at 1.4567) and double the number of near month puts.

So, recommendation would be buy 1 lot of 15D EUR/AUD At-The-Money call and 2 lots of At-The-Money put options.

Huge profits achievable with the strip strategy when the underlying exchange rate of EURAUD makes a strong move either upwards or downwards at expiration, with greater gains to be made with a downward move.

Hence, any hedger or trader who believes the underlying currency is more likely to plunge downside can go for this strategy.

Cost of hedging would be Net Premium Paid + brokerage/commission paid.