As it is sensed that Aussie dollar may attempting to look superior over Euro in medium term future, we advise to hedge the Euro’s depreciation over AUD through below recommendations.Option Strategy: Option Strips (EURAUD)The strip is more of customized version combination and more bearish version of the common straddle.It involves buying a number of near month ATM calls (strikes at 1.4567) and double the number of near month puts.Unlike spreads, combinations allow adding both calls and puts at a time in our strategy.It is a combination the option instruments are to be of the same underlying currency, strike price and expiration date.Huge profits achievable with the strip strategy when the underlying currency exchange rate makes a strong move either upwards or downwards at expiration, with greater gains to be made with a downward move.Hence, any hedger or trader who believes the underlying currency is more likely to plunge downside can go for this strategy.Cost of hedging would be Net Premium Paid + brokerage/commission paid.
The material has been provided by InstaForex Company – www.instaforex.com