Apr 2, 2024

Traders on Alert as $2.85 Billion Dollar-Yen Option Expiry Looms

StoneX Trader Warns of Volatility as $2.85 Billion Dollar-Yen Option Expiry Looms

In a recent article in Bloomberg, Mingze Wu, a currency trader at Stonex Financial in Singapore, shares his insights on current trading conditions as the yen hits its lowest level since 1990.

“There will be eyes on the $2.85 billion dollar-yen options trade — it is a chunky expiry,” says Wu. “With investors holding short yen positions, and with even heavier intervention risks percolating, this may cause volatility in the yen.”

With the yen currently trading at levels that Finance Minister Shunichi Suzuki warned could trigger “bold measures” to prevent it from plummeting any lower, traders are already on high alert. Traders who have sold dollar-yen options at a strike price of 150.5, amounting to a notional value of $2.85 billion are especially concerned, as in order to hedge their positions they would need a stable yen.

This situation comes after hedge funds have already suffered significant losses multiple times from Japan’s currency this year. Anticipating a strengthening of the yen after the BOJ would raise interest rates, many traders bought options which would have gained value if the dollar-yen pair dropped. Despite Japan hiking interest rates for the first time since 2007, the currency instead fell to historic lows.

As the expiration date looms, traders will be closely monitoring the potential for an intervention or other steps to support the currency. 

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Read the original article here. 

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