EUR/JPY Currency Options

What the call and put give you

A call locks in the right to buy EUR at the strike exchange rate. A put locks in the right to sell it there. Paying the premium gives the buyer a choice; it does not oblige the buyer to exercise.

All example rates are JPY per EUR. A higher rate means a stronger EUR.

The example trade

Assume the underlying starts at 160 JPY per EUR. One option has a strike of 160, a premium of 2 and a multiplier of 100,000. The total premium is JPY 200,000. Prices and premiums are hypothetical; the call and put use equal premiums to make the comparison easy.

The following results are at expiration, before fees. If exercise creates another position, the calculations assume that position is immediately closed at the stated value.

Buying EUR calls

You buy the call because you expect the underlying price to rise. At 165 JPY per EUR, the right at the strike is worth (165 − 160) × 100,000 = JPY 500,000. After the premium, your profit is JPY 300,000.

At 160 or below, the call expires without intrinsic value and loses its JPY 200,000 premium. Its expiration breakeven is 162 JPY per EUR. At 161, the price has risen but the trade still loses JPY 100,000.

Buying EUR puts

If you expect a fall instead, the put costs JPY 200,000 in this example. At 155 JPY per EUR, it is worth (160 − 155) × 100,000 = JPY 500,000. Your profit is JPY 300,000 after the premium.

At 160 or above, the put loses its entire premium. Its expiration breakeven is 158 JPY per EUR. A smaller fall to 159 still leaves a loss of JPY 100,000.

Before expiration

You can sell an option to close when a market is available. Its resale value also depends on time remaining and implied volatility, so the expiration breakevens do not determine every earlier trading result.

The purchased option can lose its full premium. Exercise may create a separate position or funding obligation. Selling an uncovered option can produce losses larger than the premium received.

Continue learning

What moves EUR/JPY? — Compare the two economies, central-bank expectations and market flows.

Where to trade EUR/JPY options — Check the access route, premium currency and settlement terms.

Currency option pricing — Learn how time, volatility and interest-rate differences affect premiums.

References

CME cross-rate options rules, Chapter 303A · Dealer FX option conventions · CME: FX quote conventions · CME: FX products and specifications · Federal Reserve: monetary policy transmission · Options on futures: exercise and assignment