FxWirePro: Prefer diagonal debit call spreads to hedge GBP/CHF in narrow range

Technicals Briefing (GBP/CHF):

EOD and weekly technicals raises a caution for ongoing short term downtrend as dropping prices do not evidence corresponding volumes and there was a sense of divergence evidenced on RSI curve to the rising prices. Both daily and weekly stochastic oscillator signals indecision but remained in oversold zone, %D line crossover occurred near 20 levels.

The pair should remain in a choppy range now, with GBP outperforming in the crosses. So, our recommendation would be buying 2M (-1.5%) In The Money 0.60 delta calls and simultaneously writing near-month (2%) Out Of The Money puts. The delta of combined position should be at around -0.22.

As shown in the diagrammatic representation, one can make out how the option payoff at expiry increases as the exchange rate diminishes.

This strategy is typically employed when the options trader is bullish on GBPCHF over the longer term but is neutral to mildly bearish in the near term.

As there is intraday buying trend is on with positive technical indications, we see buying opportunities in binary calls for a targets of 15-20 pips.