FxWirePro: EUR/USD shorts straddle place tight hedge in range-bound zone

On medium term perspectives Euro trading against dollar would see a range-bounded trajectory of 1.0521-1.2107 amid Greece negotiations boiling around the corner.

Medium term trend has been downtrend with relative strength index signaling bullish strength on monthly charts, (RSI 14 at 33.0691).

While slow stochastic suggests oversold pressure as %D line crossover occurred below 20 levels.

The pair signing to fall well within above trajectory but slightly upward bias, we recommend shorting At-The-Money straddles with similar maturity.

To execute this strategy one has to sell 1M At-The-Money call and sell 1M At-The-Money put options.

The highest returns can be achieved when the EUR/USD on expiration date is trading at the strike price of the options sold, which means exchange rate after 1 month should remain somewhere near current prevailing exchange rate.

At this price, both call and put options mature worthless and the options writer keeps the entire initial credit taken as profit.