FxWirePro: EUR/CAD collars to hedge uptrend participation (deploy near month call and mid month put)

On daily charts of EURCAD a serious Doji is formed to trace out caution for bulls. As per our earlier recommendation uptrend continuation persisted as inverted hammer pattern candle occurred at 1.4058 levels which is to be considered as a caution of continuation of upswings. But for now a sharp Doji is formed at 1.4313 levels followed by a long real body candle with day's high (or week's high) testing resistance exactly at trend line at 1.4431 levels. RSI and slow stochastioc are still showing strength in convergence of rising prices.

If you think Euro to spike up against Canadian dollar, then cover your underlying currency exposures with collars strategy.

When above technical reasoning bothers your trade sentiments, 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 do you do that? Well the hedger takes following positions constructs this strategy: Write an OTM call option + hold an ITM put option (near month Call & mid month put).

Writing OTM calls may likely to fetch certain returns since any slumps alerted by DOJI evidence in reality in near future.

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.