At the moment, if you have to observe the intermediate trend of AUDCAD, it seems to be bullish biased but restrained at 1.0134 and long-term trend has been non-directional. The intraday sentiments signal little buying sentiments but the upside potential is capped at 1.0053 as we observed the pair hasn’t currently been able to breach and sustain above this resistance level where prices were rejected in the recent past at the same juncture. But uptrend in the intermediate term can also not to be ruled out.

While the spot FX is trading at 1.0040. 1w ATM IVs are creeping up at shy above 5.24%.

Amid this uncertain trend direction, let's suppose that we execute following option trading positions by writing 1w at the money -0.49 delta put and write an at the money +0.51 delta call of same expiry for the net credit.

While going long in 1000 units of spot FX of AUDCAD, the cost of going long in the spot would be negligibly lower than that of above option trades, but considerable. Thereby, we understand that the total premiums received for short option positions would certainly be more than spot FX trades.

Most likely scenario: On expiration, if AUDCAD rallies above the strike price to 1.0134 (resistance for intermediary trend), the 1w short put would expire worthless.

While the short on ATM call expires in the money and the 1000 units should be obligated and exercised, producing a negligible gain.

But including the total premiums received upon entering the trade would render the certain profits; hence, the total net profit stood up to slightly higher than premiums received which is also the maximum profit attainable.

Adverse scenario: Alternatively, when the spot FX price of the pair keeps dipping due to failure swings at resistance, short call expires worthless (premiums on this trade can be pocketed in safely) but the naked short put and spot long position suffer large losses.

The short put is now worth more and needs to be bought back while the long spot position has also lost. But in a case of exercising obligation on puts would be taken care by these spot outrights.

Covered straddles are limited returns, unlimited risk options strategies similar to the writing of covered call. Another way to describe a covered straddle is that it is simply a combination of a covered call write and a naked put write. The major reason why we are advocating this strategy is that the IVs are extremely on the lower side and long term trend is non-directional.