Outrageous Predictions
Carry trade unwind brings USD/JPY to 100 and Japan’s next asset bubble
Charu Chanana
Chief Investment Strategist
Singapore Sales Trader
USDJPY has gained 1.4% in the month of November and continues to trade volatile on the back of many potential changes in Japan:
If you are bearish on USDJPY:
Consider selling a Ratio Risk Reversal to receive premiums while expressing a bearish view on USDJPY. Due to the put-call skew with puts being more expensive, you can consider selling 2 calls for every put option you buy. Use the 3 week date 22nd Dec to cover the Fed meeting on 10th Dec, NFP data (Nov) on 16th Dec and US CPI (Nov) on 18th Dec.
Risks
Watch out for USDJPY breaking above 157.25 as this strategy could lead to losses above that level. Both the max loss and max profit is unlimited – losses accumulate if USDJPY rises above 157.25 (from the call options) and profits start to grow if USDJPY falls below 154 (from the put option).
If you are bullish on USDJPY:
Consider buying a Risk Reversal expiring on 22nd Dec which covers all the US data in December. You will receive premiums trading this option strategy.
-Buy 3 week (22 Dec) USDJPY call option at strike 157
-Sell 3 week (22 Dec) USDJPY put option at strike 154.
Risks This content is marketing content and should not be considered investment advice. Trading financial instruments carries risks and historic performance is not a guarantee for future performance.
Watch out for USDJPY breaking below 153.90 as this strategy could lead to losses below that level. Both the max loss and max profit is unlimited – losses accumulate if USDJPY falls below 153.90 (from the put option) and profits start to grow if USDJPY rises above 157.00 (from the call option).
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