From last 6 weeks, GBPNZD remains stuck in a 1.80 – 1.7380 range.

We still foresee the major downtrend likely to resume and evidence further slumps ahead as the approach of the March 2017 Brexit deadline, Supreme Court findings and end-year survey and hard data are likely to attune markets to harsh Brexit realities.

In a medium term perspective, GBPNZD has further downside potential, and there’s potential for all-time lows again.

The Brexit-related dangers for the UK economy beyond initial confidence are yet to develop, and the scale and scope of BoE’s easing would cap GBP.

ATM IVs of this pair is trading 11% for 2w and 1m tenors as the sideway trend likely to persist.

The long put butterfly spread is advocated on speculative grounds that carries the limited returns and the limited risk. The strategy is taken when the options trader thinks that the underlying spot FX would not spike or drop much dramatically on expiration.

Three distinctive strikes are involved in this spread and it is constructed by buying one lower striking put, writing two at-the-money puts and buying another higher striking put for a net debit.

The execution: Buy (1%) 1m in the money put option, short 2 lots of 2w at the money put options, simultaneously; buy one more (1%) 1m out of the money put option.

The maximum return for the long put butterfly is achievable when the GBPNZD spot remains unchanged as stated in above range at expiration. At this price, only the highest striking put expires in the money.

The maximum loss for the strategy is limited to the extent of initial debit taken to enter the trade plus commissions.