Having two spot currency positions,
short EUR/USD long GBP/USD
We are looking for a way to diminish the risk of the spread going against us. The basic idea is to invert the positions, namely:
long EUR/USD short GBP/USD
However, this would not only eliminate the risk, but also any profits that might arise. We would like to be able to cancel the hedge position in exchange for paying a premium. How do we use options to execute this strategy?
Would creating the following positions achieve the desired effect?
put short EUR/USD put long GBP/USD