The British pound has been quite stable versus the Dollar in the past month with a range not greater than 1%.
There is important data to be released tomorrow in the UK. The morning will start with the bank stress results at 7GMT, governor Carney speech will take place at 9GMT and CPI data will be released at 9:30GMT. Will we see some action or rather continue to experience low volatility?
Currently, ATM GPBUSD options have a relatively low volatility. The options are priced with 8% versus EURUSD with 10.4% and other pairs such as USDJPY, USDCHF and even USDCAD that indicate much higher volatility, around 11%.
Low volatility can be a good opportunity to buy the options of the pair prior to the data tomorrow since it effects the cost of those options. High volatility translates to a higher option price and vice versa.
Considering the upward trend against the dollar and the dollar index continuing to weaken, there is an interesting, semi strangle position you can consider. Buying a CALL with strike equaling the R1, 1.5745 and a PUT with strike OTM at S2, 1.5654 on half the amount. In this example, the CALL is on the amount of a 1 lot and the put on the amount of 0.5 lot expiring on Thursday.
On the ORE platform in the Marketplace, you may view and trade this strategy under the name “Semi strangle”. The strategy will appear as such and the amounts are adjustable.
In the graph below you can view the scenarios of the trade idea on expiry.
Your premium at open equals $473 for the strategy. You begin to profit if/when the spot trades beyond either strike. If the pair sees no volatility and does not trade beyond wither point, you will lose 100% of the premium paid.
The content provided is made available to you by ORE Tech Ltd for educational purposes only, and does not constitute any recommendation and/or proposal regarding the performance and/or avoidance of any transaction (whether financial or not), and does not provide or intend to provide any basis of assumption and/or reliance to any such transaction.
Recommended Content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.