FxWirePro: Shorting EUR/JPY ATM straddles yields assured returns and binary puts for speculators

Technical watch:

Currently, RSI (14) on intraday chart trending near 46 levels with downward convergence, on closing basis movement should be closely watched if it suggests reversal signals.

It alerts bulls for losing buying interest as the bears being aggressive to take over the rallies as the slow stochastic noises with %D line cross over around 70 levels (current %D line flashes at 64.3052). But it cannot be concluded as overbought situation. We see trend as non directional but slightly downward bias. This has always been extremely tough & risky to have opened position in non-directional trend.

Option trade recommendation: Naked Straddle Shorting

EUR/JPY's non directional pattern is persisting but some bearish candles are indicating slight bearishness, candles such as spinning top and candle resembling a shooting star occurred at 135.802 and 135.793 respectively.

As we foresee non-directional trend is puzzling this pair on EOD charts we like to remain in safe zone and recommend shorting a straddle using At-The-Money options, thereby, one can benefit from certain returns by shorting both calls and puts.

Short ATM put and ATM call (strikes at 134.959) simultaneously of the same expiry (preferably short term for maturity is desired).

Maximum returns for the short straddle is achieved when the EUR/JPY price on expiry is trading at around 135 levels only as both the instruments have to wipe off worthless. So that the options trader gets to keep the entire initial credit taken as profit.

But on intraday front, we suggest going for long in binary puts on every rally for a targets at around 134.75 levels, this would provide best speculating opportunity.