It has been widely acknowledge that the USDJPY was trading within the range of 87 to 93 for the past 3 months due to the currency option play of double-no-touch strategy. For option players, it is to their advantage that USDJPY stay within these two parameters for the duration of the option. The buyer of the structure paid out a multiple of the premium risked. They protect their investments when they feel it is prudent by buying USDJPY ahead of 87 and selling it ahead of 93 in an attempt to keep the range intact and their structure in place.
The seller of the option will have the exact opposite interest; to knock-out the options by pushing the market through one of the strikes. Once USDJPY trades above or below the strikes (below 87 or above 93), the seller of the options gets to pocket the premium and the structure expires worthless.
On the 17th, during the Asian and American sessions the 93 level was to be tested but fall short at R1 level of 92.70. Yesterday during the Asian session, the USDJPY was a bit quite after a strong uptrend during the previous American session. During European session, the cross inched upward trying to break through the strong resistance level of 92.70. USDJPY attempted twice and failed. The third try at
With a strong candle, USDJPY has no difficulty to breakthrough the 93 and R1 level at 93.40. At that level, the cross take a breather and than continue its journey upward tpward the R2 level or at least 94. The cross managed to touched 93.95 at
The battle of the option was clearly won by the seller.
My 1 min scalp, I position myself at below 93 level and rode through the 93.40.
