GBP/JPY breaks below 162.702 exposes to more bearish potential
As stated in our recent post, the pair experienced more bearish interest in the market. On daily charts, it has breached supports at 162.702 that has exposed towards 160's. The slumps are well conformity to the huge volumes which signifies the bearish trend is intensified.
Slow stochastic has almost approached oversold region and still maintaining %D crossover, while same is that case on RSI (14) as it shows converging these dips to intensify selling momentum even at oversold territory.
So far, we see no harm for bears with medium term trade setups as lagging indicators are pretty much the same as leading indicators, MACD and 21DMA has still been a sell both on weekly and monthly graphs.
The prices have slid well below 21DMA just a month ago on monthly chart that has created more room for ongoing bearish trend. 21DMA crossover above 7DMA doesn't even allow short term bullish opportunities.
So thereby, as it was not managed to hold onto major supports at 164.304 or 162.702 levels, it is now the time for targets 160.207 or below and even at 156.480 levels are pretty much possibility in the days to come.
Good news for option holders as the ATM IVs swinging crazily above19 % for one week expiries which is at higher side. We can ponder arresting this potential downside risks through Put Ratio back Spread in 2:1 proportion and is more effective hedging strategy than any other means when one could sense more bearish momentum with spiking IVs.
So, as shown in the diagram stay short buying 2W at the money -0.51 delta put, 1M (1.5%) out of the money -0.31 delta put that would function effectively. While simultaneously, short 1 lot of 4D (1%) ITM put option would generate assured returns on any abrupt rallies, shortly longs on ATM puts are about to function that would take care of potential downswings.
Alternatively, if they wish to short OTM instruments, they sell puts that has delta of less than 0.15. Which means they sell deep out of the money options. The idea behind this trade is that the chance of this option to expire worthless is 85%. (1-0.15 = 0.85 or 85%).
The delta of a back spread or ratio spread is generally dominated by the option with the greater quantity the further it is from expiration. That makes sense, because the more days to expiration, the deltas of options are not as close to 0.0 or 1.00 as they are when there are fewer days to expiration.
Slow stochastic has almost approached oversold region and still maintaining %D crossover, while same is that case on RSI (14) as it shows converging these dips to intensify selling momentum even at oversold territory.
So far, we see no harm for bears with medium term trade setups as lagging indicators are pretty much the same as leading indicators, MACD and 21DMA has still been a sell both on weekly and monthly graphs.
The prices have slid well below 21DMA just a month ago on monthly chart that has created more room for ongoing bearish trend. 21DMA crossover above 7DMA doesn't even allow short term bullish opportunities.
So thereby, as it was not managed to hold onto major supports at 164.304 or 162.702 levels, it is now the time for targets 160.207 or below and even at 156.480 levels are pretty much possibility in the days to come.
Good news for option holders as the ATM IVs swinging crazily above19 % for one week expiries which is at higher side. We can ponder arresting this potential downside risks through Put Ratio back Spread in 2:1 proportion and is more effective hedging strategy than any other means when one could sense more bearish momentum with spiking IVs.
So, as shown in the diagram stay short buying 2W at the money -0.51 delta put, 1M (1.5%) out of the money -0.31 delta put that would function effectively. While simultaneously, short 1 lot of 4D (1%) ITM put option would generate assured returns on any abrupt rallies, shortly longs on ATM puts are about to function that would take care of potential downswings.
Alternatively, if they wish to short OTM instruments, they sell puts that has delta of less than 0.15. Which means they sell deep out of the money options. The idea behind this trade is that the chance of this option to expire worthless is 85%. (1-0.15 = 0.85 or 85%).
The delta of a back spread or ratio spread is generally dominated by the option with the greater quantity the further it is from expiration. That makes sense, because the more days to expiration, the deltas of options are not as close to 0.0 or 1.00 as they are when there are fewer days to expiration.
