Friday, May 28, 2010

FXY (Japanese Yen) - Bet on Yen Upside Points to Bet on a Market Tumble

FXY (Yen) is trading 109.31. The LIVEVOL™ Pro Summary is below.

This blog is connected to the "The European Crisis Explained and Currency Option Trading" blog. Click Here to read that one. It's inextricably linked to the European crisis.

The Yen Trust has traded over 17,000 options in the first two hours on total daily average option volume of just 1,894. All but 128 contracts have been calls. The largest trade has been a 110/125 call spread purchase in Jan 2011. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates that the calls are mostly opening (compare OI to trade size). You can also see that there is no OI even close to that large anywhere else near the money.

This is a bet that the Japanese Yen goes up. The total outlay is 100 * 8709 * ($4.40 - $1.00) = $2,961,060. Max gain is at 125 for $10,399,440.

The Skew Tab snap (click to enlarge) is included. I have just shown Jan 2011.

As the prior blog discussed, the Yen shows upside risk; i.e. the upside is more expensive than the downside. I have highlighted the 110 and 125 calls. This is a bet that gets long while selling the expensive vol (the upside).

This bet is not in a vacuum. It implies not just a bet on the strength of the Yen, but possibly/probably on a downward move in the GBP, Euro and an upward move in the USD relative to those two. The way the market has behaved recently, that would imply a downward move in our equity indices.

This is trade analysis, not a recommendation.

Legal Stuff:


  1. Wow Mr. LiveVol you're looking at the same trades I am (been waiting on Mr Yen) and I'm already in on that EEM.

    You must be very smart ! :-)

  2. Its a shame the FXY options don't have tighter bid-ask spreads. My broker is listing FXY as "Hard to Borrow" that doesn't make any sense!