Market: Yen, 6J_f, USD/JPY
Buy or Sell?: The Yen is approaching weekly support and could be due for a technical bounce, sell overpriced puts.
Range: 1.20ish should provide technical and psychological support.
Sell February Yen puts
December currency futures are going off the board soon and we feel like the rollover could be exaggerating the current leg lower. In addition, the Yen has been struggling to hold its ground in recent months, but is approaching significant trend-line support on a weekly chart. We feel like the odds favor the market holding these levels, or at least pausing the decline. If we are right, today's overpricing in the put options should quickly erode to the benefit of option sellers.
We like the idea of selling the February 1.15 Yen puts for about 35 ticks or $437.50. As always, selling options involves theoretically unlimited risk. The profit potential is $437.50 minus transaction costs and occurs if the option is held to expiration and the futures price is above 1.15 (depicted as the red line on the chart above). We anticipate the net margin on this trade to be $1,000.
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