FxWirePro: GBP/NZD options trading perspectives ahead of RBNZ – Long straddles for major trend and Credit Call Spread for interim trend

We run you through two currencies in this write-up, amid monetary policy seasons from their central banks. GBPNZD FX markets are likely to sense huge turbulence (minor trend has been bullish, whereas, the consolidation phase in the major trend remains intact, refer above charts), accordingly, we advocate below options strategies amid central banks’ monetary policy seasons in both the UK and New Zealand. BoE has been on hold as expected, on the flips side, RBNZ is scheduled for its monetary policy next week, which is most likely to maintain the status quo until next year. A Bank of England (BoE) rate hike is on the table, BoE governor Mark Carney pointed out yesterday. Of course only if Brexit chaos can be avoided. That sounds clearly GBP positive compared with the Kiwis dollar as the RBNZ is unlikely to bring in any change in its monetary policy.

While from last 2-years, GBPNZD is has been stuck in range although consolidating with more upside potential. In such a scenario, options straddle is the best suitable in such turbulent option market circumstances, hence we load up longs in put as well as the call with 50% delta. So, go simultaneously long in at the money call and, and limited risk to the extent of initial premiums paid options.

Long options straddle that is likely to fetch unlimited yields during higher implied volatility scenarios amid RBNZ’s. 

Well, this options trading strategy that is used when the options trader ponders that the GBPNZD would experience significant volatility in the near term but expects the swings in either way.

Well, in GBPNZD options, we now keep an eye on decisive breach of strong support at 1.8760 levels. 

Hence, alternatively to the above-advocated strategy, although we could see some sort of bearish sensation we project the GBPNZD outlook to be in the range with major trend goes in consolidation phase, the recommendation is to go long in 2W ATM delta +0.51 call, and simultaneously short 2W (1%) ITM call for the net credit.

The lower strike short calls to reduce the cost of hedging, this would help in purchasing at the money long calls and this strategic position is entered to reduce the cost of hedging.

Currency Strength Index: FxWirePro's hourly NZD spot index is inching towards -86 levels (which is bearish), GBP at 5 (neutral), while articulating (at 14:53 GMT).

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex