Median 4-week horizon returns (vol pts.) and information ratios from selling cross-yen 6-week straddles in 2016.
Options delta-hedged daily at LDN close using smile forward deltas and option-expiry matched forwards.
We believe that BoJ has shifted its monetary policy stance in last monetary policy meeting (MPM), however, any decisions by the central bank at the next MPM (including some “surprises” discussed above) would be unlikely to play a role of game changer, unless the bank (and the government) implements the regime shift in “helicopter money policy”.
As was seen in January when EURJPY rally ignited by the surprising BoJ decision to introduce NIRP lasted only for three days, given the current condition, where JPY’s fundamentals are solid (e.g. increased current account surplus).
Short EUR/JPY 6-week straddles to monetize its relative gamma richness.
High frequency (hourly) EUR/JPY realized vols are running at a 7.5%-8.0% pace excluding yesterday’s BoJ-related gyrations, a good 1.5-2.0 vols below current short-end ATMs.
This is thinner than in higher beta crosses such as AUD/JPY, but we prefer EUR/JPY since comparable policy dilemmas of the ECB and BoJ around further QE and resulting tapering concerns ought to suppress directional momentum in the cross and render it relatively inert to bond market stress of the kind witnessed earlier this month.
The 6-week option expiry also falls before the US election date and removes direct exposure to a market-unfriendly outcome on the day.


Mexico's Undervalued Equity Market Offers Long-Term Investment Potential
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts
Goldman Sachs Raises ECB Rate Hike Forecast Amid Persistent Energy-Driven Inflation
Fed Rate Cut Hopes Fade as Oil Prices Stoke Inflation Fears
ANZ and Westpac Forecast Two RBA Rate Hikes in March and May 2026
Trump’s "Shock and Awe" Agenda: Executive Orders from Day One
China Holds Benchmark Loan Prime Rate Steady for Tenth Consecutive Month
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures
Bank of Japan Holds Rates Steady Amid Inflation Concerns and Yen Weakness
RBA Raises Cash Rate to 4.10% in Closest Vote Since Transparent Voting Began
Paraguay Central Bank Holds Interest Rate at 5.5% Amid Slowing Growth
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty




