Long term CAD hedging perspectives with covered call credits spread

The call credit spread trading strategy is employed owing to the below key drivers of CAD exchange rate that the price of the underlying moves will go down moderately in the near term but not in long run.

Tier1 data has begun to divulge the real impact of the oil price shock.

Despite the BoC's claims, non-energy exports and the US recovery are providing little support.

We adjust our USD-CAD forecasts modestly lower, but still look for further CAD weakness into year-end.

Real-money funds: We continue to recommend an Underweight FX allocation to the CAD.

Corporates: Canadian importers should raise FX hedge ratios on USD-CAD payables

The strategy is especially meant for short term bears but not losing interest in long run.

Add longs 21D Out-Of-The-Money (strike +1%) calls with 0.35 times delta plus negative theta value for holder.

Short side for covered underlying positions, 5D In-The-Money (strike -1%) call with positive theta for writer of ITM call.