• FX options continue to position for further USD/JPY losses

• Even when USD/JPY tested 145.00 last week, traders bought JPY calls

• Demand maintains a strong premium for JPY call over put strike options

• 1-month 25 delta risk reversals trade 2.1 JPY calls again on Tuesday

• Ensures demand for implied volatility when USD/JPY comes under pressure

• 1-month implied volatility high 12's after recovery from high 11's Friday

• Buyers of strikes as low as 135.00 with sub 3-month expiries seen Tuesday

• Related - USD/TWD option surge spreads through Asia FX
USD/JPY FXO implied volatility


USD/JPY risk reversal

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