Goldman Says To Sell USDJPY: "Pain Trade Is Lower"

Tyler Durden's picture

If this particular FX trade reco came from Tom Stolper, we would urge everyone to do the opposite with both hands and feet. However, it hasn't, and since it actually makes intuitive sense, we would urge readers to at least give it a cursory skim through.

From Goldman's Tony Song

Positioning For A USDJPY Move Lower

USDJPY has rallied 3.5% in 2 weeks on wide expectations that Abe will come into office on Dec 16 and force BOJ into aggressive monetary easing (target 2% inflation). Market as a result has seen one way demand for USDJPY higher options driving skew sharply higher to recent highs. The desk believes that there is significant risk in USDJPY in the next month given event risk (most notably Japan elections/BOJ meeting and US fiscal cliff), but the desk feel that with positions relatively stretched, holiday season looming and the long side of the equation almost solely dominated by short term spec guy that the PAIN TRADE is now likely USDJPY lower from here, at least much more so than what the vol curve currently indicates.
Idea: Sell 1x2 USDJPY Put Spread 82.20/81.20. Zero Cost. NY Cut. 21Dec Expiry. Spot Ref 82.20. 1BF max downside.
Strikes are chosen based on the concentration of stops below 81.50 (where we expect short term spec names to start throwing in the towel). This could happen if:
A). Abe loses election or backs off from his aggressive policy stance. (Latter more likely)
B). US gets further away from a resolution on fiscal cliff. (Baseline forecast is for a decision on Dec21 before which we will see plenty of volatility and headline risk)
C). Risk negative shocks in either Arab Springs, EU, China etc.
D). Headline shocks and choppy price action driving weary market participants into closing their books for the year and taking us to downside stops in a vicious cycle.
Obviously there is a big chance that USDJPY goes higher as well in which case the trade ends up flat. Entry levels are attractive (below) and this trade works well as an overlay to an existing long cash position which many people may have. Hope it’s helpful and feedback much appreciated.
1mth 25 delta $JPY puts trading very cheap vs. ATMs (which you’re selling)

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GetZeeGold's picture



I sense a trick.

aint no fortunate son's picture

Let's get to the point - what does Thomas Stolper say? All else is meaningless.

LawsofPhysics's picture

Talk about a "pain trade", all fiats are going to ZERO.

CPL's picture

TPTB are just making sure the horses in the glue factory are executed in the order they require.


Gotta save the fattest and most glue worthy for last.

mjorden's picture

What other Option do I have?

CPL's picture

Silver, gold and oil.  Only currencies worth anything now.

Ivanovich's picture

So Goldman is buying USD/JPY, then?

Glass Seagull's picture

Goldman: You can sell the 1x2 directly to us if you so wish.

CPL's picture

Buddy hid the bodies in his basement.  Plus the girls body in post mortum had his deposit in her, after she was dead.  (the sick fuck)


No sympathies at all, the evidence points to him V&ing these kids and setting up an intruder.  Be assured though that his sickness combined with his impressive arsenal will be used to move laws around on gun ownership. 

Cthonic's picture

It's not politically correct to gloat about double tapping anybody, much less 'mere' trespassing burglars.  He's going down; he didn't just defend himself, he openly admitted to executing one of them.  More details in this article.|head

LongSoupLine's picture

Fuck you GS...and your world domination.  Eat shit!

VonManstein's picture

To agree with the Devil is not always a sin

MrBoompi's picture

Time to buy USDJPY?

spanish inquisition's picture

The long term play is that Japan has been dying since 03/11.

The short term play is if you increase the juice (via printing money) to the paddles, you can get a reaction that would simulate life and give hope that Japan could live again. This is played against the ability of DC to put down the crack pipes and page boys to put forth a meaningless document of reform (ala EU can kicking) to avert the fiscal cliff and put us on the path to prosperity once again (via money printing).

We have entered the realm where you are betting one country is going to devalue faster than another. So the main point of this trade is ... Can you get in and out with a profit fast enough, so that your "profits" are not devalued into an overall loss.

Pool Shark's picture



I don't give a flying fig what Goldman SAYS.

I only care about what Goldman DOES...



Mike2756's picture

Abe already backed off on the printing, was Song asleep?

Orly's picture

No he didn't.  I guess you weren't short about 11 o'clock last night Eastern US time...

But that ramp was short-lived and has almost completely retraced already.  The market is realising that Abe is a mouth-piece and that there is very little he can do to affect monetary policy except to jaw-bone.

His banter was shot last night; he's done.  Goldman is right; it's time to fade this move and it's a big one.  The only thing to look out for is repatriation of yen funds from overseas business at the end of the month.  Next week should be the real humdinger in the short xxxJPY pairs, especially the USDJPY and probably the EURJPY as well.


GFORCE's picture

Fool me once shame on you, fool me 40 times, ehhh??!!

Is Tony Song really a person?? Or just a false moniker used to skim the accounts of sheep and

leave no paper trail?

Likewise Tom Stolper. Where would you go from there with a record of 0 for 20 fx calls?

Sylvia Plath's picture

Last time credit suisse tried to post a stunt like this on ZH only for it to blow up.


I have not yet seen one of these work out.. and isn't ZH all about fading the squid?