Menu

Search

  |   Insights & Views

Menu

  |   Insights & Views

Search

FxWirePro: USD/TRY credit call spreads for swing trading ahead of FOMC decision, Turkish political risks

USD-TRY has calmed down ahead of the FOMC decision, declining from near 3.07 earlier in the week to around 3.03, possibly on assumption that the Fed will not liftoff and that this will take pressure off EM FX for now, especially TRY. In the background, however, political developments in Turkey continue to portray a high-risk juncture. One of the more reliable political surveys - polls suggests that the same hung parliament will result.

So thereby our ITM calls on below strategy is working pretty well and now it's the time for OTM calls which has begun its functioning as the pair has dropped from 3.0693 levels to 3.0033 levels.

So with swing trading mindset  ahead of FOMC event, we recommend buying 1W 1% out of the money 0.41 delta calls and simultaneously short 4D 1.45% in the money call (the pair may drop maximum up to 1.9650), the combined delta value should be around -0.33. We've shown in the diagram as to how the strategy can be built in and a positive cash flow is certain as long as the pair maintains below 2.9656 levels. However, for the demonstration purpose expiries have been identical.

The maximum gain of this call spread strategy is the net initial credit received upon entering the trade. To reach the maximum profit, the USDTRY price needs to close below the strike price of the lower striking call sold at expiration date where both options would expire worthless.

  • Market Data
Close

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.