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Aug 27 - 02:55 AM

USD/JPY - Options Flag Risk Of Powell Induced Volatility/losses

By Richard Pace  —  Aug 27 - 02:30 AM
  • Big gains for USD/JPY option implied volatility as fed Powell looms

  • Higher implied volatility reflects perceived risk of more actual volatility

  • Overnight expiry 12.5 - almost double since Tuesday (pre Powell expiry)

  • Break-even for simple o/n vanilla straddle now 55 pips in either direction

  • Also captures a news conference from Japan PM Abe Friday nL4N2FS12T

  • One-week implied volatility 7.6 vs 5.75, 2-week 7.05 vs 5.95 since Tuesday

  • Benchmark 1-month implied volatility paid 6.65 today from 6.2 Tuesday

  • Risk reversals have added vol premium for JPY calls over puts- downside risk



USDJPY o/n, 1-week and 1-month implied volatility Click here

1-week and 1-month USDJPY risk reversals Click here

Source:
Refinitiv IFR Research/Market Commentary

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