FxWirePro: Put ladder to monitor NZD/JPY’s short term rallies and long term bearish trend

We maintain medium term bearish trend stance, while short term upswings can also to be utilized by below strategy. In our opinion, although some price recoveries that we've been seeing from last couple of days, monthly chart signals us the medium to long term bearish trend.

Currency Option Strategy: NZD/JPY Short Put Ladder

With current spot FX at 78.038 levels, we like to advocate this strategy today on long term basis and it goes this way, short 1.5% ITM put option with shorter expiry and simultaneously add longs on 15D ATM -0.50 delta put option and one more long position on 1M (-1.5%) OTM -0.39 delta put option..

Maximum returns are limited to the extent of initial credit received if the NZDJPY rallies above the upper breakeven point (BEP) but large unlimited profit can be achieved should the underlying exchange rate of NZDJPY  makes a vivid downswings below the lower BEP.

What does it do with current trend: Since the short put ladder is an unrestricted return with partial risk bearing strategy that is deployed because in addition to the puzzling uptrend in short term and downtrend in long-term, we think that the NZDJPY would also perceive significant volatility in the near term.

Short Put Ladder Spread profits in all 3 directions; When the pair goes upwards (strongly or moderately), remains stagnant or goes downwards strongly. Indeed, the Short Put Ladder Spread has made profitable 4 out of 5 possible outcomes which make its probability of profit extremely high.