FxWirePro: EUR/JPY short strangle for range bound trend of 138.113 - 133.295

Technical Purview:

It is observed that there is range bounded swings on this pair where upper band is 138.113 which is maintaining as a resistance point while 133.295 as support from last couple of weeks. Currently, RSI (14) trending near 50.8604 levels converging according to the price fluctuations, on closing basis movement should be closely watched if it suggests downward signals.

Although the there is neither a trace of overbought nor oversold situation, it alarms bears trying to take over the rallies as the slow stochastic noises with %D line cross over around 40 levels (current %D line flashes at 42.6134). Moreover, the low implied volatility is also experienced from last couple of days. Implied volatility for this pair for next 6 months is mentioned as shown in the nutshell.

Since the range bounded market is evidenced and the continuation is suggested by technicals and lower implied volatility at 9.06% to substantiate this reasoning, we recommend taking the advantage of these benefits through below option trading strategy. As the risk appetite varies from different investors to different traders, we've customized our formulation of strategies for such varied circumstances.

Short OTM call and Short one more OTM Put of the same maturity for net credit. The OTM strikes should be selected so as to meet out the above specified bands on both the sides.
This strategy derives limited returns with unlimited risk that is taken when the options trader thinks that the EURJPY would experience little volatility in the near term. Maximum returns for the short strangle occurs when the exchange price of EURJPY on expiration date is trading between the strike prices of the options sold. At this price, both options expire worthless and the options trader gets to keep the entire initial credit taken as profit.