The beauty of protecting barrier options, if you happen to have the deep pockets and market contacts of a central bank, is that even of the barrier is triggered you can still make money on the defense.
Lets say a large Asia central bank bought several hundred million euros in the 1.3100 area. With EUR/USD bouncing 50-60 pips, they’re able to sell into strength. Easy-peasy. Rinse and repeat.
What happens if the trade goes bad? Those euros get thrown into the reserve portfolio…
EUR/USD matched the overnight high at 1.3164 before stalling.
