We had advocated straddle short strategy a fortnight ago, the premiums what we received upfront are proven to be certain yields by now as you can probably see a range bounded technical trend.
Please refer below weblink for our previous post on the strategy:
In this week, EUR/CHF may sense little buzz in OTC, as result of following significant economic data events in euro zone.
German’s ZEW economic sentiment on Tuesday (19th), ECB’s monetary policy decision and Swiss trade balance data is likely to be announced on Thursday (21st).
As a result, EUR/CHF IVs may pick up but no drastic change in IVs could be expected that keeps option writers on upper hand. The implied volatilities of EURCHF ATM contracts of all expiries have been the least among G10 currency segment.
In EURCHF FX options markets, it seems like still vast disparity exists between option premiums and IVs which in turn “a cause of concern as to whether spot FX would move in sync with IV and risk reversals indications or not”.
On weekly charts EURCHF’s range bound pattern is still persisting but some bearish candles are indicating slight weakness, (Ranging between upper strikes 1.1005 and lower strikes at around 1.0705 levels.
Hence, we recommend shorting a strangle using out of the money options, thereby, one can benefit from certain returns by shorting both calls and puts.
At current spot at 1.0919 with range bounded trend keeping in consideration we would like to remain in safe zone by achieving certain returns though shorting a strangle.
Execution: Short 1W OTM put (1.5% strike difference referring lower cap) and short OTM call simultaneously of the same expiry (1% strike referring upper cap) (we reiterate, preferably short term for maturity is desired).
The material has been provided by InstaForex Company – www.instaforex.com