As stated earlier we managed to extract the minor gains on Bull Put Spread of EURJPY currency cross. Now the intermediate trend is taking U turn on this pair. Yes indeed, downside pressure now added risks to Euro over Yen. In such circumstances, Bear Call Spread can fetch you better yields than anything else.The BoJ left its asset purchase program unchanged at both of its two April meetings despite some political chatter to the contrary.Given our skepticism that there would be a new policy announcement, given the logistical constraints surrounding the current program, our focus was on the semi-annual update to the Bank’s forecasts.On this front, the medium term inflation projections are still faithfully zooming in on the 2% objective, consistent with the unchanged policy stance.Derivatives Insights:Option Strategy: Bear Call SpreadIn order to establish the above stated strategy, hedgers should focus on selling a Call option and purchase another Call at a higher Strike Price for a net credit.Use a Bear Call Spread when you expect the underlying currency to move lower or sideways so that the calls expire worthless and you keep the entire premium.A Bear Call Spread is better over short Call since it has limited risk unlike unlimited risk in case of short call.Use a short time for expiration to take advantage of the time decay and give the underlying currency less time to go against you.Kindly compare the earnings on prevailing rates with our previous call on the Bull Put Strategy on the same EURJPY, the traders who’ve acquired this position earlier and their portfolio may have already generated around 500 plus JPY by now. Intraday traders can book their profits but hedgers should remain quite. Fresh positions can still be constructed as we foresee downside pressure on Yen.
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