Bank of Japan intervention fears have capped and contained USD/JPY and consequently pushed FX option volatility premiums to levels where they would be certain to reward holders when USD/JPY breaks-out.
The volatility on which options thrive has consequently been lacking and that's pushed implied volatility, which gauges its future expectations, to the lowest levels since early 2022.
Those holding cash hedged options can profit from an increase in realised and/or implied volatility.
That shows the potential to reward option holders when USD/JPY does get moving.
There's a strong implied volatility premium for JPY call over JPY put options despite USD/JPY flirting with long term highs.
That means dealers are far more wary of USD/JPY falling and boosting implied volatility, which reinforces the perceived threat of BoJ intervention.
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