The implied volatility of 1W expiries are spiking at 12.80% and 12.29% for 1 month tenors.

We see few near term catalysts for the AUD to retreat from recent gains.

Domestic data improvements, clear stabilization in China’s data, and a softer US data pulse has set the scene for the AUD to remain strong.

However, we continue to see the AUD lower over the medium term.

As stated in our last post, after the pair struggling at 0.7486 levels (Upper BB), it has opened today with a gap down at 0.7379 levels. While leading oscillators remained in overbought territory and showing selling momentum and bearish crossover.

Technicals also say, AUDCHF bearish swings have been traveling in sloping channel with a distance of around 1500-1700 pips.

Most importantly, in sensitivity table if you have to compare these vols and premiums with probabilistic figures in distinctive scenarios of OTM strikes, the options pricing seems reasonable, which means more likelihood of these puts expiring in the money.

You can also observe the performance of these contracts (see %change in premiums).

With above reasoning, use the below option strategy on hedging grounds as AUD/CHF long term bearish environment holding stronger despite intermediate attempts of bulls taking over rallies and wish to earn capital gains.

Hence, Weights are to be more to cushion downside risks as a result, we recommend holding 2W at-the-money 0.51 delta call and simultaneously hold 2 lot of 1M at-the-money -0.49 delta put options.