Hanging man on GBP/JPY; add BPS on hedging front

Technical glance:

On daily chart of this pair shows bearish hanging man pattern candlestick on up-move occurred which means an earlier trend is about to be reversal .

But before jumping into the guns please note that this is for medium term basis.

A hanging man is traced out on daily charts at around 189.870 levels which is a trend reversal signal.

This is confirmed by oscillators with downward convergence to the price line.

RSI (14): 68.6712, converging with falling prices.

Stochastic: %D line 86.6221; %K line 73.4598 crossover above 80 levels signaling a clear overbought scene.

Currency Option basket: Bear Put Spread (GBP/JPY)

Bear Put Spread shall be used over Protective Put when the premiums on Protective Puts are too costlier.

Bear Put Spread = ATM Protective Put (189.66) + Sell another Put with lower Strike Price (Out of the Money = 187.555) for GBP 100,000

It comes with a partial hedging option which only minimizes the loss if the underlying currency has to move lower but does not cap the loss.

Bear Put Spread reduces the cost of hedge by the premium collected on the Out of the money Put but it comes at the expense of Partial hedge rather than a complete hedge

The above chart explains how this strategy considering in a scenario evidences the different profitability at different intervals of exchange rates.