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Trader bets yen will reverse course

Mike Yamamoto (mike.yamamoto@optionmonster.com)

A trader is betting that the CurrencyShares Japanese Yen Trust will reverse course and rise sharply in the next six months.

optionMONSTER's tracking systems show that a trader bought 5,500 September 112 calls for an average price of $0.74 and sold the same number of September 95 puts for about $0.99. There was hardly any open interest in either strike before the trades appeared, so they are clearly new positions.

This combination spread is directionally similar to buying stock. The premiums of the long calls will rise if the shares gain, while the puts sold short will dwindle in value. But the opposite will occur if the stock falls, and the trader will face the obligation to buy shares if they are below $95. (See our Education section)

The FXY rose 0.74 percent on Friday to close at $102.75 but remains at its lowest level since August 2009. The exchange-traded fund had been above $124 for several months before beginning a steep decline toward the end of October, driven lower with the value of the yen as the new Japanese government attempts to revive the country's long-stagnant economy.

Total option volume in the name was almost 25,000 contracts, compared with a daily average of 10,675 in the last month.

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