GBP fell further than expected in the aftermath of the UK vote to leave the EU and after the MPC eased policy at the start of August. Since then, a bounce in economic indicators has been accompanied by a GBP bounce to levels where fresh shorts, vs EUR, are attractive.  

The UK economy was slowing before the referendum and then additional uncertainty from the vote will only exacerbate that downtrend. The initial weakness of (mostly) survey data pointed to an economic hit but overstated the near-term magnitude. The better recent data confirms the sky didn't fall, but a long period of corrosive economic uncertainty still lies ahead.

OTC Outlook and FX option strategy:

As shown in the above nutshell, 1m IV positive skewness is significantly rising for OTM call strikes and risk reversals, on the other hand, seem comparatively attractive bid for upside risks over 3m tenors.

As a result, we ponder over shorting a short term ITM call strikes while holding long term calls to hedge upside risks in 3m tenors.

Hence, we recommend initiating longs in 2 lots of 3M ATM +0.51 delta call, and simultaneously short 1 lot of ITM call (1%) 1m expiry in the ratio of 2:1.

So, trading option spreads in different strikes allows the traders in many tricky market scenarios and likely to fetch positive cash flows.

Please be noted that the tenors chosen in the diagram are for demonstration purpose only.