After watching the Japanese Yen trend lower for more than 77 weeks it appears we are now starting to see the smatterings of a bottom coming in on the currency. While it may be a bit early to 'pound-the-table' I do see an interesting opportunity presenting itself within the options space. According to my very strict WCTS model, I can only consider a long position (through options) if the current market price of a 6 month option is half of what I believe the intrinsic value of the option will be at my target price. (intrinsic value = strike price - target price). Today I took a look at the call options and we appear to have just that situation. Using a very conservative price target (W. Gann's 50% rule) I believe the currency can realistically trade back into the 1.1377 area. At the same time, I can buy a seven month (December, 2014) 1.10 call option for about .002 points (or about $250). Should the market go to my target, that option will have an intrinsic value of .0377 or about $471. This is an interesting trade because the low cost enables me to buy 2 contracts (total invested is about $500). I will look to sell 1/2 the position should prices double and ride the remaining 'free' position into expiry. Should the Yen appreciate into the Optimal Trade Entry (short) window the remaining option could realistically have $13,000 of intrinsic value - not a bad reward/risk ratio and something all traders should consider in earnest.
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Interesting. So the yen up? Seems hard to imagine the japanese yen in a camp of strong currencies... The interest rates are low, so what might be the force that would strengthen this currency?
CRInvestor
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Well ironically enough (because J6 is quoted in US dollars) it is probably more a function of a falling US dollar then an appreciating Yen - but a setup is a setup is a setup