EUR/JPY Currency Options

How the call and put work

A EUR call gives the right to buy EUR with JPY at an agreed rate. A EUR put gives the right to sell EUR for JPY. The buyer pays a premium for the right; the seller accepts the corresponding obligation.

The examples quote JPY per EUR. A higher number means EUR is stronger against JPY. In the EUR/JPY quotation, the first currency is the one being bought by a call on the pair.

The example contract

Assume a hypothetical vanilla option covering 100,000 EUR, with a strike of 160 JPY per EUR and a premium of 2 JPY per EUR. The total premium is JPY 200,000. These are illustrative negotiated terms, not a current quote or an exchange contract specification.

The calculations measure expiry intrinsic value in JPY. A physically settled contract exchanges currencies; an option on futures can create a futures position instead. The arithmetic alone does not specify the delivery method.

Buying EUR calls

A call gives its buyer upside exposure to the specified underlying. For this example, use a strike of 160 JPY per EUR and a premium of 2 JPY per EUR. With the stated multiplier of 100,000, the premium cost is JPY 200,000.

At expiration with the underlying at 165, intrinsic value is (165 − 160) × 100,000 = JPY 500,000. After the premium, the gain is JPY 300,000 before other costs.

At or below the strike, the call has no intrinsic value and loses its whole premium. Breakeven at expiration is 162 JPY per EUR. At 161, the call is in the money but still loses JPY 100,000 after the premium.

Buying EUR puts

A put gives its buyer downside exposure. Assume the same 160 strike and 2-unit premium, costing JPY 200,000 with the same multiplier. The equal call and put premiums are hypothetical, not a claim about actual market quotes.

At expiration with the underlying at 155, intrinsic value is (160 − 155) × 100,000 = JPY 500,000. Subtracting the premium leaves JPY 300,000 before costs.

At or above the strike, the put loses its full premium. Its breakeven is 158 JPY per EUR. At 159, it is in the money but still loses JPY 100,000 after the premium. Before expiration, time and implied volatility also affect the price; these expiry calculations do not predict its resale value.

Premium, timing and settlement

A correct price view does not guarantee a profit. The move must be large enough and arrive before expiry to recover the premium. Before expiry, time remaining and implied volatility affect the price available when selling to close.

The premium limits the standalone purchased option’s loss. Exercise can create another position requiring funding or margin, and keeping that position introduces further risk. An uncovered seller can lose much more than the premium received.

Continue learning

What moves EUR/JPY? — Economic news and market conditions explain the currency’s price movements. Study them after the call and put mechanics.

Where and how to trade EUR/JPY options — Compare access routes, quotation, contract size and what happens at expiry.

Currency option pricing — Learn how time, volatility and both currencies’ interest rates affect premiums.