FXWIREPRO: Yen Eyes on Gains Again As Boj's Kuroda Hints Stimulus - Hedging Positions in Line With Risk Reversals

FXWIREPRO: Yen Eyes on Gains Again As Boj's Kuroda Hints Stimulus - Hedging Positions in Line With Risk Reversals

12 April 2016, 15:51
Roberto Jacobs
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FXWIREPRO: Yen Eyes on Gains Again As Boj's Kuroda Hints Stimulus - Hedging Positions in Line With Risk Reversals

As we could see the change in delta risk reversal numbers into negative territory, that signals underlying pair would resume its bearish travel in next 1 weeks time.

Since, the bank lending in Japan rose 2.0%, compared with a gain of 2.1% expected year-on-year for March.

He (BoJ's Gov Kuroda) also stated that he expects CPI to pick up toward 2% target, as a result financial markets continue to be volatile.

The yen was mostly firm and steady in Asia on Tuesday as investors anticipated policymakers may attempt to further jawbone the currency weaker after a recent surge against the dollar.

USD/JPY traded at 107.92, down 0.02%, while AUD/USD traded at 0.7591, down 0.05%.

 The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was down 0.27% at 93.97.

Our hedging strategy (Put Ladder) seems to have mitigated FX fluctuating risks as it contains short in 1W ATM put since implied volatility is not expected to be higher (below 11%) when risk reversals are lesser comparatively to 1M expiries which is good for option writers in next 1 week, and short another 1W (1%) OTM put with positive thetas, simultaneously go long in 2W (1%) ITM -0.67 delta put option.

The material has been provided by InstaForex Company - www.instaforex.com


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