FX Derivatives: Whistling Past the Volyard

Research evidence excerpt

FX Derivatives: Whistling Past the Volyard

Ladislav Jankovic AC (1-212) 834-9618 Sanjana Shinde (1-212) 622-2001 Global Markets Strategy J P M O R G A Nladislav.jankovic@jpmchase.com sanjana.shinde@jpmchase.com

J.P. Morgan Securities LLC J.P. Morgan Securities LLC 24 July 2026

Arindam Sandilya (65) 6882-7759

arindam.x.sandilya@jpmorgan.com

JPMorgan Chase Bank, N.A., Singapore Branch

FX Derivatives vols started to consolidate in April and continued that trend

even as the ceasefire was halted and oil re-entered levels

Whistling Past the Volyard greater than $100/bbl. The backdrop favored short vol strate-

gies and aligned closely with signals from our USD gamma

• FX vol remains disconnected from rising macro risks sentiment model (Figure 2FXmarketshavebenpositionedforrange-boundmovesforthemajorityoftheIranWar,excludingwhenoilsurpased10.). As the conflict progressed, spot

of Middle East and next week’s DM central bank out-

sensitivity to geopolitical headlines diminished noticeably,

comes.

suggesting growing market complacency. The same gamma

• USD/JPY optionality screens unusually cheap versus model is nearly fully allocated to short vol now, more than in

FX/JPY peers. We favor zero-cost USD/JPY calls any previous period of the ‌conflict.

financed by CHF/JPY calls. Realizing JPY correla-

tions and intervention risks warrant downside protec- Figure 2: FX markets have been positioned for range-bound moves for

tion; Consider long delta-hedged 3M 25D USD/JPY the majority of the Iran War, excluding when oil surpassed 100.

risk reversals. February 26th was pre-Iran War declaration. March 12th was when oil hit 100 for the

first time during the war, and April 7th was when the first ceasefire was announced

• Compressed front-end volatility creates carry-efficient