I'm looking at potential yen strength impacting my $NKD_F long. For those hedging exposure, do you primarily use currency options or direct FX trades to offset potential losses from a stronger JPY against your Nikkei futures position, or do you just scale out?
For managing JPY exposure on NKD futures, I find a combination of shorting USD/JPY futures or using OTC forwards to be effective, depending on the notional size. Scaling out is an option, but it doesn't directly address the currency risk for the portion of the position you still hold.
Most people just run the currency risk unless it's a huge position. The cost of hedging can eat into any gains pretty quickly, and Nikkei futures already have a decent amount of volatility to manage.
It really depends on the size of the position and your overall portfolio's currency exposure. For smaller holdings, a direct FX trade or even just letting the currency move might be simpler than options, but for larger books, currency options offer more precise hedging with defined risk.