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Oct 15 - 11:55 AM

USD/JPY - FX Options Wrap - Central Bank Focus, Big USD/JPY Topside Threat

By Richard Pace  —  Oct 15 - 09:40 AM

There's been good demand for implied volatility on dips, especially USD/JPY, and for the 2-month expiry date, which captures a host of December's key central bank policy decisions.

USD/JPY erased 113.00-114.00 option barriers, but 115.00 is much bigger.
If broken, related short gamma will be exacerbated by a significant drop in the size of existing vanilla option positions above, potentially fuelling short covering and more volatility. nL1N2RB0KH

Implied volatility is already retesting the week's highs, but from a mid-6 handle, it's got room to run.
One-month JPY puts demand a rare premium to calls, which can boost implieds if USD/JPY keeps rising.

EUR/USD settles around 1.1600, and although downside premiums have eased, they remain intact.
Implied volatility has been bought on dips, especially 2-month, which captures December 15/16 U.S and European Central Bank decisions, with their risk of increased volatility. nL1N2RB0J7

GBP/USD vols also bought on dips, with 2-month favoured for its December 16 BoE inclusion. nL1N2RB0WE

One-week lira options captured Turkey's policy decision, but the market seems ready for further cuts and lira losses. nL1N2RB0IM

For more click on FXBUZ

USD/JPY 1-month 25D risk reversal Click here

USD/JPY FX option strikes expiring through end 2021 Click here

EUR/USD 1-2-month expiry FX option implied volatility Click here

2-month extends premium to 1-month GBP/USD option implied volatility Click here

Refinitiv IFR Research/Market Commentary


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