This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Yen Trends

After a choppy summer, the Abenomics trade is working again as Japanese economic data has improved and USD/JPY is back to 100. Doubts that Abe's unconventional economic policy would be able to stoke demand are starting to fade a little as higher inflation expectations are also starting to stick: the consumer price index and five-year inflation swaps are at or near new highs.

Traders have already started to price a test of 101 or higher as more likely in short-term yen options, but the longer part of the curve has not responded yet. A two-month 25 delta risk reversal in yen futures options at the CME was recently -0.26% (call minus put IV), indicating that out of the money puts were more expensive than calls. But a six-month risk reversal was still priced positively, at 0.07%. If the trend from earlier in 2013 is to be any guide, another leg up in USDJPY should see those back month volatilities shift to match the rest of the curve.

We will start with a short call spread for now and may add 6J puts on a confirmed trend.

Trades: Sell to open 6J March 2014 0.0102 calls for $0.000132 and buy to open March 0.0103 calls for $0.000108.

Trading one lot of this vertical call spread means risking about $950 to make $300 -- the initial credit received -- if the spread expires worthless. For traders with equity-only accounts, I can suggest a similar trade in the CurrencyShares Japanese Yen Trust (FXY) in the comment thread if there's interest.

OptionsProfits can be followed on Twitter at

Jared can be followed on Twitter at
At the time of publication, Jared Woodard held positions in yen futures.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FXY $78.90 0.20%
AAPL $117.34 -0.81%
FB $107.12 2.76%
GOOG $767.04 3.29%
TSLA $237.19 3.01%


Chart of I:DJI
DOW 17,888.35 +168.43 0.95%
S&P 500 2,102.63 +22.22 1.07%
NASDAQ 5,156.3060 +47.64 0.93%

Free Reports