FxWirePro: Replicate straddles for EUR/USD and EUR/CAD if IVs seem tepid

We wrote in our recently posted article on EURCAD hedging perspectives that run you through the straddle strategy whose implied volatility was considered to be very low, and therefore the tendency is likely to rise.

EURCAD ATM IVs of this pair is just shy above 8.1% for 1m tenors (refer above nutshell). As a result, straddles seemed suitable.

Otherwise, if you reckon that this doesn't suffice for long options, then go ahead long hedging via delta calls without giving in any second thought but on pure hedging grounds.

Alternatively, one can also configure a position with unlimited reward to mirror the long straddle, so you'll have to be net long option positions. Substitute choice seems to be a backspread that will also render cost-effective hedging vehicle as the underlying spot FX this pair has been spiking higher from last 2-3 months to resume bullish major trend.

Another would be a long option with additional short verticals further OTM. In both of these examples, you can arrange the legs such that theta and vega match your needs/expectations. And remember that you don't have to keep the legs in the same expiration series.

Currency Strength Index: FxWirePro's hourly EUR spot index has shown 74 (which is bullish), while hourly CAD spot index was at -24 (mildly bearish) while articulating at 12:27 GMT. For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit: 

http://www.fxwirepro.com/invest