Japanese Yen Options (USD/JPY)

What the call and put give you

A call locks in the right to buy JPY 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 USD per JPY. A higher rate means a stronger JPY. The usual USD/JPY chart runs in the opposite direction: a JPY call benefits from that chart falling. A call on USD in the USD/JPY quotation would be the opposite trade.

The example trade

Assume the underlying starts at 0.0067 USD per JPY. One option has a strike of 0.0067, a premium of 0.0001 and a multiplier of 10,000,000. The total premium is USD 1,000. 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 JPY calls

You buy the call because you expect the underlying price to rise. At 0.007 USD per JPY, the right at the strike is worth (0.007 − 0.0067) × 10,000,000 = USD 3,000. After the premium, your profit is USD 2,000.

At 0.0067 or below, the call expires without intrinsic value and loses its USD 1,000 premium. Its expiration breakeven is 0.0068 USD per JPY. At 0.00675, the price has risen but the trade still loses USD 500.

Buying JPY puts

If you expect a fall instead, the put costs USD 1,000 in this example. At 0.0064 USD per JPY, it is worth (0.0067 − 0.0064) × 10,000,000 = USD 3,000. Your profit is USD 2,000 after the premium.

At 0.0067 or above, the put loses its entire premium. Its expiration breakeven is 0.0066 USD per JPY. A smaller fall to 0.00665 still leaves a loss of USD 500.

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

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

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