FxWirePro: Have you missed EUR/AUD’s surge with put ratio spread – capture with credit put spread

The uptrend that has been gradually prolonging from last three months has taken one step ahead to break trendline resistance; the pair has now taken a trendline support exactly at 1.5598 which we had earlier anticipated. It looks like this currency cross has set up a new stage for its bull run as you can make out from strong bull candles with all leading technical oscillators are positively converging and lagging indicator to justify this in medium term.

As the implied volatility of ATM options is flashing more than 14%, it is quite riskier to build strategy with more number of shorts. Moreover, the pair has already rallied onto 1.6005 levels with increased IV in the same pace. So it is advisable to build portfolio with credit call spread instead of put ratio spread at this point in time.

Well, here goes the strategy this way, buy 15D (-1%) OTM -0.41 delta put instrument, simultaneously short 7D (2%) ITM put with positive theta. The combined delta of this strategy should be at around positive 0.45. The delta is positive because the position is bullish. The Delta is at its highest speed when:

• The EURAUD is between the two strike prices.
   
• Options get closer to the expiration date.