FxWirePro
Short

EUR/AUD bears alarm, higher IVs keep OTM writers on upperhand

FX:EURAUD   Euro Fx/Australian Dollar
182 0 2
We think short term bears are finding opportunities from every now and then after the formation of sharp shooting star at peaks of 1.5923 levels, this bearish view is coupled with the downward convergence with the leading oscillators.

We could foresee selling pressures in near term but keeping strong supports at S1 at 1.5496, S2 at 1.5269 and S3 at 1.5105 levels. You can neither expect a steep slumps nor spiking upswings in short term but slightly bearish bias. We believe with this bearish indication the pair to either remain stagnant or drag towards 1.5269 levels.

Put holders must be happy with the current levels of this pair ( EURAUD             spot fx at 1.5613) as you can higher IVs for ATM contracts but no dramatic dips could be expected at this juncture (medium term uptrend seems to be quite healthy with robust volumes generation).

Thereby, we advocate 2 lots of 15D longs of ITM delta puts that should be on the job with prevailing dips, and simultaneously OTM shorts in call with shorter expiry which would mean that expect dips upto certain extent with upside cap but for now downside potential is seen which is underway. OTM shorts because of the higher IVs with bearish momentum keeps us option combination strategy more productive even if it dips a minor downswings.

EURAUD             spot FX is currently trading at 1.5605, as ATM IVs flashing more than 16% which is on higher side, from here onwards our adivce of 2 lots of 15D longs in ITM striking delta puts would certainly function along with higher implied volatilties and short 1W (1%) OTM call with positive theta that would reduce costs of trade and maximize profits considering the current short term downtrend.

In our opinion this pair creates best swing trading opportunity even if it spikes 1.5% from here onwards, so it is better to use any abrupt rallies and stay calm with earlier ITM long puts and any minor upswings can be utilized OTM call writings.
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