FxWirePro

USD/CAD option trade setup for certain yield regardless of trend

FX:USDCAD   U.S. Dollar/Canadian Dollar
201 0 4
Technical watch:

It seems CAD taking a halt from its intermediary bull run against USD which has begun from the channel resistance (see both daily and monthly plotting).

The pair has dipped from the highs of 1.4689 levels to the current 1.3167 within a span of 2 and half months.

But for now, on daily charts we could see some sort of alarms for bull as the pair is testing supports at channel base at 1.3211, intraday charts still pass on some sort of bullish momentum.

On the contrary, on monthly charts, Shooting star pattern candle occurred at peaks of uptrend around 1.2967 levels and shown their bearish effects.

Both leading oscillators signal selling pressures, as RSI (14) evidences a bearish convergence with the dipping price spikes from overbought zone, currently trending downwards at 64 levels, so we believe there has been bearish sensation on this pair.

While, Clear bearish crossover on stochastic from overbought zone signals selling momentum.

However, for a long-run uptrend reversal is still conditional upon breach of channel support, it would be conducive for bears if it breaks channel base, otherwise we may see price bounces again in short term atleast.

Trade tips:

On speculative grounds we recommend buying either one touch binary calls in order to extract maximum leverage on extended profits as a result of potential upswings.

Since, 1W implied volatility has to decline in a slightly bullish environment in short term, we recommend a short vega             strategy.

Hence, using any deceptive rallies, you decide to initiate a bull put spread for net credits, so short 1W (-1%) in the money put with positive theta if you expect that USDCAD             will spike up moderately over the next near future but certainly not beyond your imagination, simultaneously, go long in next month at the money -0.5 delta put option.

Please be noted that the put you buy has to be at the money and the put you short has to be in the money with an anticipation of USDCAD             could rise and remain unchanged within shorter expiration, and there onwards any fall below current spot FX would be taken care by longs in ATM put and also if you have any active longs in spot FX would be protected.

Maximum profit: The initial credit received for this trade which is certain, after 1W if it continues its bearish business cash flows would be exponential.

The maximum risk is the difference between the two strike prices, minus the credit you received.
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