Reduced-cost collars for bullion bulls

Any unanticipated disruption by Fed's rate policy should not puzzle the strength registered from last fortnight or so, thus in order to play it safe below options strategy is recommended.

The zero-cost collar is recommended on verge of surge in the dollar also.

Intraday price band: 1192.57 on north range - 1186.59 on south range, although we are upward bias, overpriced sentiments are boiling as oscillators suggest overbought pressure.

Hence for now ATM binary puts on every price rise are recommended.

Short-medium term price band: 1195.55 on north range - 1170.15 on south range.

Option Strategy: Collars on XAU/USD

The execution is has to be by buying At-The-Money (strike at 1188.70) 0.5 delta put option while writing 21D (0.5%) OTM covered calls (strike at 1194.70) with +ve theta value.

The strike price at which the premium received, should contribute more than 50% of the cost of premium of the protective put (see diagram i.e US$ 858.33).