Butterfly Spreads (CADJPY): 

As stated in our earlier post, the time for Yen holding tight back again, all chances of Yen may look superior over Canadian dollar in medium term future but no dramatic differences in prices on either direction, thus we advise to hedge this pair with below recommendations.

On the contrary we believe CAD's loses are majorly due to crude's weakness. Currently the pair is trading at 91.051 with volatility of ATM contracts marginally inching higher (at 13.20%).

Hence, the recommendation on buying (-1%) OTM -0.24 delta put while simultaneously shorting ATM put with similar expiries and buy (1%) ITM -0.84 delta put while simultaneously shorting another ATM put with similar expiries. This strategy is structured for a larger probability of earning a smaller but certain profit as CADJPY is perceived to have a low volatility.

The long put butterfly spread is a limited profit, limited risk options trading strategy that is taken when the options trader thinks that the spot CADJPY will not rise or fall much by expiration and they would be dubious on downward mommentum, they want to play it safe. 

The highest return for this strategy is achievable when the pair at expiration is equal to the strike price at which at the money options are sold. At this price, all the options expire worthless and the options trader gets to keep the entire net credit received when entering the trade as profit.