FxWirePro: Shorts of AUD/JPY PRBS on job amid intermediate uptrend

Those who have AUDJPY put ratio back spread, that shorting in the money puts while constructing put ratio back-spreads are functioning well as the pair has been showing upswings from last week, it has spiked up to 86.009 levels, so that the current shorts would go worthless and entire premiums can be spared as absolute profits.

But these shorts would always be at risk of exercise if the market tumbles, but you have two advantages regardless of swings by improving odds in its positions as explained below.

The implied volatility of near month ATM calls are perceived almost close to 24.21% which is quite higher side but good for prevailing shorts while using vega spreads we can neutralize IV effects and participate in upcoming short term downswings.

Firstly, observing maximum tenor on long side: Giving a longer time to expiration for long sides, any abrupt drastic moves on the downside so that assignment can be covered by the long puts.

Secondly, time decay advantage: Using near month contracts or contracts shorter tenor on short side signifies the importance of entering the position when IV is lower than average but AUDJPY IV is seen at 24.21% which is quite higher side (due to data season), so let us keep maturity on short side as normal as near month contract period. Time decay and implied volatility work in your favor on the short puts.