IVs of 1M GBPCAD ATM contracts have been stagnant 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 the end of last month and continued gaining slightly from beginning of this month. As a result, it's been evidencing sideway to slightly upswings.

We don't expect any dramatic fluctuations in this pair for next week or so given stagnant implied volatilities and BoE's monetary policy decision which is likely to remain unchanged. Yet it was just in January when an MPC member voted in favor of raising interest rates, and a sudden shift towards easing would mark a substantive change in direction. We expect the British Pound could weaken further on any ensuing confusion if the BoE statement hints towards further easing.

The Cable has been a favourite pair of speculators for this week, accumulating massive interest considering the size of The UK economy, GBPUSD was drifting down with an open interest build up of 3.52%. We reckon cable to either move in sideways or plunge further but don't see any recovery until it gets clarity on Brexit  matters.

Option trade recommendation: Naked Strangle Sale

At current spot at 1.8998 the pair moving in range bounded trend and stagnant IVs, keeping these factors into consideration we would like to play it safe by achieving certain returns though shorting a strangle ahead of Thursday's BoE's monetary policy decision.

Short 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).

Maximum returns for the short strangle is achieved when the GBPCAD price on expiry is trading between the OTM strikes (i.e. 1.919 and 1.8775)as both the instruments have to wipe off worthless. So that the options trader gets to keep the entire initial credit taken as profit.

Remember, this strategy exclusively for speculative purpose. Maximum loss for this strategy is to the extent of when the underlying spot FX on expiration date is trading beyond the strike prices of the options written.