• USD/JPY butterfly spread options can gauge and hedge FX intervention threat - there's increased demand/premium Friday

• 2-week 10-delta fly paid 1.5 vols, Nov 30 expiry 10-delta fly 1.35, 1-month 15 delta at 1.0 and 1-month 10 delta 1.275 vol

• The benchmark 1-month 25 delta butterfly spread was paid more recently at 0.525

• Prices still low versus summer highs, when 1-week 10-delta flies were about 3.0 and 1-month about 2.0 in mid-June

• Risk of Japanese intervention rises the further USD/JPY trades above 160.00 and these options are a lower cost hedge
USD/JPY 10-delta butterfly spreads

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