Our last target at 1.4355 levels has been convincingly achieved, the currency cross for now is likely to retest even below these levels around 1.4161 levels back again. Even though some minor buying interest seen in this pair during earlier European sessions, the bulls could not break trend line resistance at 1.4306 levels as a result it is now to claim more dips further.
As we foresee more bearish potential on this pair, huge profits achievable using suitable leveraging instruments. With the strip strategy positive cash flow is possible irrespective of swings directions, when EURCAD exchange rate makes a strong move either upwards or downwards at expiration, with greater gains to be made with a downward move.
The rationale: Any potential downswings should be optimally utilized, so as to participate in that downtrend, weights in the portfolio should be doubled with ATM puts in order to give the leveraging effects. The profitability can be maximized for every shift towards downside and this is not the same on upside.
Hence, weights are to be more to cushion downside risks as a result, we recommend holding 15D at the money 0.50 delta call and simultaneously hold 2 lot of 1M at the money -0.50 delta put options.
What makes ATM instrument more productive in our strategy is that delta effects, the delta of this instrument is here at its fastest rate and gets faster as your position come closer to the expiration date.
As a result, time decay may have a relevant impact on ATM options. A higher absolute delta value is desirable for an option buyer.
But please be noted that the absolute value of delta is a number between zero and a discount factor, therefore, 50% is not the centre value for the delta range.
ATM puts have the highest Gamma, Vega, and Theta which would mean their premium is the most sensitive to moves in either direction. The Delta of ATM options are 50%, which means there is an even likelihood of expiring ITM or OTM.
