A bank in Tokyo bought some USD1 billion in three-month euro calls against the Japanese yen Wednesday, struck at JPY115, according to traders there. Three-month implied volatility on the pair jumped from 15.4%/15.9% Wednesday, to 16.2%/16.7% Friday, a trader said. On Friday the spot stood at JPY112.80, compared with around JPY109 Wednesday, he added. A number of smaller lottery-ticket style positions also traded through the week in U.S. dollar/Japanese yen options, with traders buying deep out-of-the-money dollar calls/yen puts. Traders bought one-year yen puts struck at JPY150, and three-month yen puts struck at JPY125. Such puts are attractive because while they are cheap, if they move into the money they bring potentially massive earnings, one trader said. The dollar traded at about JPY118 Friday.
Bank Buys USD1B Euro Calls/Yen Puts
