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This may sound crazy coming from an old-school trader like me, but we need to talk about the Japanese yen…
If you’ve been frustrated with VIX hedging lately — and you should be — there’s a better way to protect your portfolio, and it just proved itself in spectacular fashion.
The yen had a huge move recently, and anyone who bought calls absolutely crushed it. The Invesco CurrencyShares Japanese Yen Trust (FXY) moved up about 1% but July yen calls exploded 50% higher.
August calls jumped around 30% and even long-dated January 2028 calls gained roughly 5%. Those are the kind of hedge returns that actually matter when markets start misbehaving.
It gets even better. When option activity ramps up in the yen, it often forces market makers to hedge aggressively, which can amplify the move in your favor. There are moments when option activity spikes so intensely that it can even nudge the underlying price.
That’s exactly the kind of dynamic you want working for you when you’re trying to build a hedge that actually pays.
Why the Yen Works as a Portfolio Hedge
Here’s the relationship you need to understand: When the yen goes up, the S&P 500 (SPX) has been going down. The yen has been inverse to SPX just like growth stocks are inverse to consumer staples. It’s a clean, systematic relationship — and right now it’s far more tradeable than anything happening in VIX products.
Think about it visually.
When the yen drops, SPX climbs. When SPX climbs, the yen sinks. It’s working as an inverse pair that gives you a clear reference point for positioning. And when yen option activity spikes, market makers often have to buy significantly more shares to hedge their directional risk, which can enhance the move you’re trying to capture.
That’s a built-in advantage you simply don’t get with the VIX anymore.
Some traders prefer spreads for hedging and that’s fine if that’s your thing. But yen options offer something spreads often don’t — clean liquidity, more straightforward leverage and the potential for outsized gains on relatively small currency moves.
You’re not fighting decaying products or odd pricing quirks. You’re trading a direct relationship with asymmetric payoff.
The Yen Setup for Real Protection
The beauty of using yen options as a hedge is the leverage you get on tiny moves in the currency. A 1% move in FXY leading to a 50% jump in near-term calls is exactly the kind of asymmetric payoff that makes a hedge worth putting on.
And you’ve got flexibility. Some traders are going out as far as two years with their yen plays, which buys you time and reduces the pressure of catching the move perfectly.
Meanwhile, VIX products have become unreliable, illiquid and frankly more trouble than they’re worth.
Next time you’re looking to protect your portfolio, don’t automatically reach for VIX calls. Consider yen options instead — they might just save you a lot of headache and actually make you money when the market turns.
Lance Ippolito Trading Team
Lance doesn’t want the CCP spying on him, so you’ll never find him on TikTok. Same goes for other social media sites, which are filled with impersonators, scammers and crypto bros.
You can only find him on his personal YouTube Channel — smash that Subscribe button! https://www.youtube.com/@LanceIppolito
And in his private Telegram channel: https://t.me/+-gVwEIwGJhplMTgx
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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