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( gpbjpy key ๐๏ธ levels)
(Tp 186.154)
(Tp 186.476)
)Tp 186.655)
COMMENT-FX Option flows point to compelling USD/JPY outlook
Nov 16, 202314:43 GMT+5
Given the forward looking nature of FX options, their price action and trade flows can offer clues on the perceived outlook for a currency pair and there's a definite theme in USD/JPY.
The realised FX volatility on which FX options thrive is an unknown, yet key parameter of the premium, so dealers use implied volatility as a substitute. Any disparity between implied and realised volatility over the life of the option therefore creates a trading opportunity.
Since Tuesday's weak U.S. CPI data knocked the higher for longer U.S. rate view, USD/JPY implied volatility has taken another hit, trading ever new lows since early 2022 amid a renewed influx of FX option sales.
Option sales/lower implied volatility are consistent with expectations of lower realised volatility.
Current option market price action should encourage the continuation of carry trades, where the JPY is sold to fund longs in higher yieldin
GBPJPY
( gpbjpy key ๐๏ธ levels)
(Tp 186.154)
(Tp 186.476)
)Tp 186.655)
COMMENT-FX Option flows point to compelling USD/JPY outlook
Nov 16, 202314:43 GMT+5
Given the forward looking nature of FX options, their price action and trade flows can offer clues on the perceived outlook for a currency pair and there's a definite theme in USD/JPY.
The realised FX volatility on which FX options thrive is an unknown, yet key parameter of the premium, so dealers use implied volatility as a substitute. Any disparity between implied and realised volatility over the life of the option therefore creates a trading opportunity.
Since Tuesday's weak U.S. CPI data knocked the higher for longer U.S. rate view, USD/JPY implied volatility has taken another hit, trading ever new lows since early 2022 amid a renewed influx of FX option sales.
Option sales/lower implied volatility are consistent with expectations of lower realised volatility.
Current option market price action should encourage the continuation of carry trades, where the JPY is sold to fund longs in higher yieldin
Note
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.