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FxWirePro: Improve AUD/JPY odds with backspreads on ongoing slumps

It is anticipated this pair to extend its slumps up to 82.601 levels first and even up to 80.604 levels in the months to come. These targets levels are indicated by leading oscillators (RSI and stochastic) with positive convergence to the existing price drops. The spot FX is currently flashing at 84.812 levels which is well below 10 day moving average curve.

One can build AUDJPY put ratio back spread regardless of swings by improving odds in its positions as explained below. That In-The-Money puts on short side in put ratio back-spreads are always at risk of exercise if the market tumbles, but you have two advantages.

Firstly, keeping maximum tenor on long side: Giving a longer time to expiration for long sides, any abrupt drastic moves on the downside so that assignment can be covered by the long puts.

Secondly, time decay advantage: Using contracts with shorter tenors (something like 3D, 5D or 7D as you have already half way of bear travelling) on short side signifies the importance of entering the position when IV is lower than average but AUDJPY IV is now seen at 15.80% which is still favorable for option writers, so let us keep maturity on short side as normal as near month contract period. Time decay and implied volatility work in your favor on the short puts.

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