FxWirePro: EUR/AUD strips for hedging serve the purpose on downswings; convert option strips into straps

This pair has been puzzling a lot by evidencing speculative price fluctuations but ever since a bullish engulfing pattern candle occurred the leading oscillators have not been showing clear signals. The bullish engulfing pattern at 1.5064 has counter attacked by a shooting star at 1.5006 levels. Weekly RSI trending near 56.4194 converging with prices dips and spikes accordingly but there is no clarity of the direction, while %D line crossover on slow stochastic above 80 levels signifies overbought pressure. More importantly the pair is now at this juncture testing crucial trend line support at 1.4847 levels.

But as it is sensed that all chances of Aussie dollar may look superior over Euro in medium term future, we advise to hedge the Euro's depreciation over AUD through below recommendations. We've been firm to hold on this strategy on hedging grounds, unlike spreads, combinations allow adding both calls and puts at a time in our strategy. From the above technical charts you can make out strips have served their purpose as the portfolio contained 2 lots of puts. But for now convert the same into straps with ATM instruments.

Currency Option Strategy:

We now want to square off the positions in strips, book the profits and for now convert the same into strap on hedging grounds. Unlike spreads, combinations allow adding both calls and puts at a time in our strategy. So, buy 15D At-The-Money delta put option and simultaneously short 2 lots of 15D At-The-Money delta call options. It involves buying a number of ATM puts and double the number of calls. The strap is more of customized version combination and more bullish version of the common straddle.

Hence, any hedger or trader who believes the underlying currency is more likely to surge upside can go for this strategy. Maximum returns can be achievable when the underlying exchange rate makes a strong move either upwards or downwards at expiration but with greater gains to be made with an upward move. Cost of hedging would be Net Premium Paid + brokerage/commission paid.