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Closing the Gap - Futures Edition

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The Aussie-Yen Carry

Closing the Gap - Futures Edition

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The Australian yield curve is inverted on the front end, while the Japanese yield curve is still in negative interest rate territory.

Because of this, there is the potential for a "carry" trade. A Carry trade's goal is to capture the difference in yields (interest rates) across debt in varying currencies.

By examining the Australian Dollar (/6A) and Japanese Yen's (/6J) recent behavior, their notional value, and implied volatility, tastytrade's team comes up with a pairs trade setup that eliminates the dollar risk and aims to replicate this "carry trade."

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