• 1-month expiry USD/JPY implied volatility is low at 7.30, yet 1-month daily realised volatility is just 5.05

• Options price far more movement than spot is actually delivering - the 2.25 gap favours sellers

• The premium that sellers collect outweighs the moves they pay out on. 1-week implied is 5.6 vs 3.4 realised

• Persistently low realised volatility is weighing on all USD/JPY vanilla option prices

• However, 1-month risk reversal setbacks meet demand at 1.90 for JPY calls over puts

• Spot is stuck in a tight range, but risk reversals say the tail risk remains a lower USD/JPY, not a break higher
JPY implied vs realised vols


USD/JPY 25 delta risk reversals

(Richard Pace is a Reuters market analyst. The views expressed are his own)