FxWirePro: Bearish candles piling up on USD/JPY, write call ladder best suitable for prevailing trend

We've been observing pretty closely lots of bearish sentiments making noise in this pair, we traced shooting star occurred at 123.898, back again at 123.058, gravestone doji at 123.413 and a spinning top on yesterday at 122.451 levels.

All of these candles are in conformity with the sufficient volumes to signal weakness in near future.

And in addition to that, weekly oscillators indicate downward convergence with these dips in prices as slow stochastic shows %D line crossover near 60 levels, while RSI converges falling prices at 55.8224.

But the major trend for this pair uptrend only but short term hedging views have been bearish bias.

Currency Option basket: Write call ladder (USD/JPY)

To execute the short call ladder strategy the positions go this way, The options trader has to sell an in-the-money call, simultaneously buy an at-the-money call and buy another higher strike out-of-the-money call of the same expiration date.

The bear call ladder may prove to be an unlimited profit, limited risk strategy in options trading that is employed when the options trader thinks that the underlying currency will experience significant volatility in the near term.

Maximum returns for the short call ladder strategy is limited if the underlying stock price goes down. In this scenario, maximum profit is limited to the initial credit received since all the long and short calls will expire worthless.

However, if the underlying exchange price rallies explosively, potential profit is unlimited due to the extra long call.