When playing the Yen carry trade i.e taking loan on Yen and converting to USD for higher interest rates..........how can one hedge against the appreciation in Yen and still come out ahead by couple of percentage points. I am very new to options, but read somewhere that cost of hedging is roughly equal to the difference in interest rates. Does hedging via options reduce the cost of hedging or is it same as hedging using the forward contracts. Also when using option will it be a perfect i.e. atleast 99% hedge or some risk is still left to deal with. Thanks All!