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Oct 20 - 05:55 AM

USD/JPY - Options Flag Warning Signs For U.S Election

By Richard Pace  —  Oct 20 - 03:40 AM
  • USD/JPY going nowhere fast, actual volatility almost non existent of late

  • However, dealers shouldn't be complacent - options aren't

  • Risk premium very high when compared to actual volatility/fair value measure

  • 1-month implied volatility 5.6 to 8.0 when expiry first captured US election

  • Eased to 7.2 amid lack of spot activity since, but retains big risk premium

  • 1-month daily historic volatility just 3.6 - implied vs historic at l-t wide

  • Historic is a fair value measure, based on past months performance

  • Risk reversals retain a solid JPY call (downside) volatility premium at 1.2


1-month USD/JPY implied volatility premium to 1-month daily historic Click here

Source:
Refinitiv IFR Research/Market Commentary

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