FxWirePro: EUR/CAD collars to hedge uptrend continuation

The leading oscillators are showing healthy convergence with every price spikes. RSI (14) looks healthily converging at 61.9093 with every price rises, it has neither approached oversold zone nor even overbought territory since March 2014. So, RSI signifies the prevailing uptrend remains intact. While another leading oscillator (stochastic) attempting to hint us the overbought heaviness, If you think Euro to spike up against Canadian dollar, then cover your underlying currency exposures with collars strategy.

This strategy is for those who have Euro exposure at present who are concerned about a correction and wish to hedge the long spot currency position. How can that be done? Well... the hedger takes following positions constructs this strategy:

Write (2%) OTM call option + hold an (2%) ITM put option (near month Call & mid month put), this helps as a means to hedge a long position in the underlying outrights by holding longs on protective put. Thereby, any declines in this pair would be taken care by ITM put options since the holder of the put option will have right to sell at predetermined strike price at expiry in case of European style options.

Maximum return = Strike price of call - Currency spot price - net premium paid or Strike price of call - Currency spot price + net credit received on short side.