By Richard Pace — Jan 27 - 06:37 AM
• Latest USD/JPY drop to new 2025 low has reignited demand for FX options
• Spot slide said to reflect potential risk aversion from tech stock sales
• Big 2.0 jump in 1-week expiry USD/JPY implied volatility to 11.5
• Benchmark 1-month expiry significant jump to 10.25 from 6-month low 9.0
• Premium for JPY calls over puts on risk reversals spikes, too
• 1-month 25 delta risk reversal to 2025 highs at 1.25 from 0.8 for downside
• Option dealers also note demand for sub 150.00 strike options
• These options would hedge risk of deeper spot losses and related
volatility
1-week and 1-month USD/JPY implied volatility
USD/JPY option risk reversals
(Richard Pace is a Reuters market analyst. The views expressed are his own)
Source:
London Stock Exchange Group | Thomson Reuters