Let's shed some light on technical insight before jumping into strategic currency trade ideas:
We could foresee trend may reverse as the Doji on rallies is expected to form on weekly chart of NZDUSD currency cross.
If the pair manages to occur this candlestick pattern, then there are high chances of bouncing back from current levels at 0.7310 else it might test next support at 0.7240 levels.
Doji on this currency pair currently indicates a market in complete balance between Supply and Demand. A close-over the Doji's high is a signal that bulls have regained strength.
Hence, the trend is slightly non-directional to bullish on this pair. The below strategy can be deployed for trading purposes.
Currency Options Strategy: Spreads on Call Ratio (1:2)
It is a Combination of Bull Call Spread and Naked Calls.
CRS = Buy a Call (ATM) + Sell more Calls at a higher strike (OTM) price usually in the ratio of 1:2 or 1:3. (Use 1:2 in this juncture)
Keep a short time to expiration to take advantage of time decay in short positions and not to give stock time to move higher.
Margin is required to take short call positions.
Breakeven will be at: short strike price + difference in strike price + net credit
Maximum returns would be the exercise price of Short Call - exercise price of Long Call + Net Premium Received - Commissions Paid.
