Working on a strategy where I trade high/low BO with early expiration hedged against a spot forex trade.
The strategy plan is as follows:
1. Hedge BO high/low with spot FX, set stop loss at max profit of BO trade.
2. If FX trade goes into profit, close or scale out. Leave BO trade open so if price reverses it could move into profit.
3. If FX trade moves into loss, close FX trade and BO via early expiration.
Other ideas include: Hedging the BO trade at a 2:1 profit margin and placing hedges in both directions.
My issue is trying to work out the lot size of the BO position so can I figure out the lot size and stop loss of the FX trade.
Is there a calculation that would allow to figure out the lot size of the BO position and figure out where the maximum profit level would be?
I would grateful for any help.