FxWirePro: CAD/JPY weakness remains intact, strips combination for fragile downtrend

Technical purview:

Considering the intermediate trend of this pair, lot of bearish candles have been piling up such as gravestone doji and hanging man with gap down formation. Weekly RSI has still been converging price slumps while slow stochastic has already reached oversold zone but not trace of %K line crossover for price recoveries.

Currency Hedging Framework: (CAD/JPY)

As it is sensed that all chances of Yen may still look superior over Canadian dollar in short to medium term future, we advise to hedge the C$'s depreciation through below recommendations.

With volatility of ATM contracts being marginally higher (at 9.26%), buying 15D At-The-Money delta call option and simultaneously short 2 lots of 15D At-The-Money put options with positive theta values keeps tight hedging regardless of swings. It involves buying a number of ATM calls and double the number of puts. This is more of customized version combination and more bearish version of the common straddle.

Huge returns achievable with the strip strategy when the pair makes a strong move on either upwards or downwards at expiration, with greater gains to be made with a downward move.

Hence, any hedger or trader who believes the underlying currency is more likely to plunge downside can go for this strategy. We've been firm to hold on this strategy on hedging grounds, unlike spreads, combinations allow adding both calls and puts at a time in our strategy. Cost of hedging would be Net Premium Paid + brokerage/commission paid.