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May 29 - 05:55 AM

USD/JPY - Options Seem Less Concerned About Intervention - For Now

By Richard Pace  —  May 29 - 05:05 AM
  • USD/JPY reached a new post intervention recovery high at 157.41 Wednesday

  • However, FX options doesn't seem concerned about more intervention, yet

  • Implied volatility gauges realised volatility risk - its under pressure

  • However, the main intervention risk bellwethers are option risk reversals

  • Those contracts will reward holders of JPY calls over puts if USD/JPY drops

  • Saw increased vol premium for JPY calls over puts before prior intervention

  • Benchmark 1-month 25 delta risk reversal 2.0 before Apr 29 USD/JPY drop

  • Hit lows at 0.7 after alleged intervention and meets supply at 1.25 since.

  • USD/JPY drawn back to another large 157.00 FX option expiry on Wednesday

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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