OTC Updates:

ATM IV of 10 days tenor is at 9.26% and OTM put strikes are flashing with higher probabilistic numbers.

While gamma is drifting healthily when we shift 50 pips either side, slightly conducive to put strikes with higher likelihood of these strikes finishing in the money.

A larger Gamma means the Delta is more sensitive to a change in the underlying market price, which means a larger risk or reward.

Technically, major trend whipsaws on 7 & 21EMAs and has been evidencing mild downswings every now and then.

Currency Option Strategy:

The options strips were deployed anticipating more downside potential in this pair, now have a look at the diagram various spot FX rate and their payoff structure. We've been firm to hold on this strategy on hedging grounds. The potential target on upside is about 50-100 pips where 100-130 pips on downside.

The rationale is that any potential downswings should be optimally utilized, so to participate in that downtrend, weights in the portfolio should be doubled with ATM puts.

So, let’s hold 15D At-The-Money 0.50 delta call and simultaneously hold 2 lot of 1M At-The-Money -0.50 delta put options. 

Huge profits achievable with the strip strategy when AUDNZD exchange rate makes a strong move either upwards or downwards at expiration, with greater gains to be made with a downward move.

Competitive advantage of this strategy: As shown in the diagram the trader can still make money in either way even if the trade anticipation goes wrong - but the underlying pair has to move in the opposite direction really fast. The 1 call bought has to beat the cost of buying all the options and still bring in some profits.

Please be noted that the expiries shown in the diagram are for demonstration purpose only, use appropriate tenors as stated above.