AUD/CAD speculative and hedging strategies

FX:AUDCAD   澳元/加元
129 0
We could sense some sort of weakness in the pair on both daily and weekly charts suggest as the RSI is a clear divergence with the rising prices. The shooting star formed on weekly graph at 1.0074 levels. While stochastic still signifies selling pressure upon %D line crossover above 80 levels which is overbought territory.

Bearish swings are certain but with speculation perspectives we recommend buying one touch binary vega puts so as to derive maximum leverage benefits. By employing these ATM binary vega puts during higher implied volatility times (the pair likely to perceive 9% of 1w contracts) one can multiply the returns by twice, thrice or even pour returns unimaginably. But do remember this call is strictly on speculative grounds.

The main advantages of such speculative instruments are maximize yields during high volatility times, when IV picks up during US sessions downward sentiments in spot intensifies, vega signifies the relative change in delta of put (it is likely to increase) and hence premiums spike up accordingly. Wider spreads indicate lack of liquidity. The spreads for one touch AUD/CAD options are constant time and barrier levels.

Currency option framework: ( AUDCAD Condor spreads)

Our opinion on AUDCAD in Q1 2016 has differently attributed from what we have mentioned above, some uptrend sentiments but we expect range bounded movements in medium to long terms considering the increased volatility (projected a gradual increase in 1m-3m ATM contracts at 10%) and neutral delta risk reversal.

When we had to study and compare this fluctuation of volatility and its comparison with risk reversals of this pair we tend to increase upper limits in the range as a result of increase in the IV.

So to protect the FX portfolio from this fluctuation the below strategy is advisable, the recommendation goes this way, shorting OTM call and buy deep OTM calls, simultaneously short ITM call and deep ITM call options with identical maturities.

The highest loss for this option strategy is equal to the initial debit taken when entering the trade. It happens when the underlying exchange rate on expiration date is at or below the lowest strike price and also occurs when the pair is at or above the highest strike price of all the options involved.
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