FxWirePro: Option Strips for hedging EUR/AUD as trendline support likely to breakout

Ever since the downswings are seen on this pair the leading oscillators have been showing downward convergence with dipping prices. RSI trending near 53.9727 with converging falling prices, while %D line crossover on slow stochastic at around 60 levels signifies selling momentum is continuing. More importantly the pair is now at this juncture testing crucial trend line support at 1.4700 levels with the above indicators being bearish bias.

But as it is sensed that all chances of Aussie dollar may look superior over Euro in medium term future, we advise to hedge the Euro's depreciation over AUD through below recommendations.

We've been firm to hold on this strategy on hedging grounds, unlike spreads, combinations allow adding both calls and puts at a time in our strategy.

Buy 15D At-The-Money delta call option and simultaneously short 2 lots of 15D At-The-Money put options with positive theta values.

It involves buying a number of ATM calls and double the number of puts. The strip is more of customized version combination and more bearish version of the common straddle.

Huge profits achievable with the strip strategy when the underlying currency exchange rate makes a strong move either upwards or downwards at expiration, with greater gains to be made with a downward move.

Hence, any hedger or trader who believes the underlying currency is more likely to plunge downside can go for this strategy. Cost of hedging would be Net Premium Paid + brokerage/commission paid.