FxWirePro: Buy GBP/AUD binary calls for 20-25 pips target; covered straddle hedges prevailing uptrend

On EOD charts of GBPAUD, we traced out an inverted hammer pattern occurred at 2.0437 levels which indicates some bounce from current levels.

No leading indicators signal crucial buy or sell but trend analysis to be taken consideration and intermediate trend being uptrend, trader should not dare to buck the trend instead buy at dips strategy should be adopted.

We look at buying binary calls from current levels for targets of 20-25 pips on speculation basis.

Hedgers are advised covered straddle that involves the simultaneous selling of equal number of puts and calls of the same strike price and maturity while owning the underlying (GBPAUD) spot outrights. Please be noted that only the call options are covered.

Therefore, the strategy goes this way, while holding GBP100,000, short ATM calls plus ATM puts with the similar expiration for net credits.

This strategy may prove limited profit and unlimited risk options strategies similar to the writing covered calls. Another way to explain covered straddle is that the combination of a covered call write plus a naked put write. Since the naked put write has a risk/reward profile of a covered call, a covered straddle can also be thought of as the equivalent of two covered calls.