1W GBPCAD ATM implied volatilities have been just shy below 11% (10.94% to be precise) which in turn a cause of concern as to whether spot FX would move in sync with vols or not.

Because sterling holding stronger from last couple of days (see technical charts) and continued gaining slightly from beginning of this month. As a result, it's been evidencing sideway trend.

Since, any dramatic fluctuations from here on is not expected in this pair for next week or so given stagnant implied volatilities, we like to get benefitted from this tepid moves.

Most importantly, BoE's monetary policy decision has been unchanged that means any underlying factors unlikely to cause much impact on this pair in short run.

However, in long term we expect the British Pound could weaken further on brexit event and any consequent confusion if the BoE statement hints towards further easing.

Option trade recommendation: Naked Strangle Sale

As we foresee narrow range trend is puzzling this pair on both intraday and weekly charts,

At current spot at 1.8795 the pair moving in no-directional trend and with stagnant IVs, keeping these factors into consideration we would like to place below trade positions to achieve certain returns though shorting a strangle as there are no significant data events that could bring in momentum on either side and evidence drastic movement.

Thus, stay short in 3D OTM put (1.5% strike difference referring lower cap)and short OTM call simultaneously of the same expiry (1% strike referring upper cap) (preferably short term for maturity is desired).

Overview: Investor thinks that the market will not be very volatile within a broader band.

Margin: Required.

Max.Returns: Limited to the two premiums received. Maximum returns for the strategy is achievable when the underlying spot FX price on expiry is trading between the OTM strikes as both the instruments have to expire worthless. So that the options trader gets to keep the entire initial credit taken as profit.

Max.Risk: Unlimited - should the market fall or rise greatly.

If the market does little then the value of the position will benefit as the short positions gain when the option time value falls.