LOL. I was wondering how long it would take before the Leeson lines surfaced. I believe Businessman alluded to that earlier on with his "arb the two" comment - but me thinks that "went straight through to the wicketkeeper" for most - so to speak...
I know this doesn't answer the original poster's question but why not just trade the CME Nikkei 225 future? They have dollar and yen based versions.
I have looked at the Asian contracts many time as a way to keep my capital moving around the clock but ES just does so much volume even during the night that it is hard for me to be bothered trading the Asian contracts. Here's something to to look at regarding the NIY (nikkei in yen)and the NKD (nikkei in dollars). If you were to take offsetting short options positions in the two nikkei contracts to neutralize the equity position and just be left mostly with currency risk. You could then offset this currency risk with a long futures currency option that was hopefully (and likely) bought for a lower price with less embedded IV. Just some thing to get everyone thinking.
The original poster (me) gave up trading Asian markets. I found the Nikkei very hard to trade intraday (or intranight), and my extremely busy 12-month old daughter now has other plans for the energy that I used to use to stay awake past 9:00p. I had a particularly hard time reliably fueling my indicators, as my data vendor, DTN, doesn't provide those markets and IB's backfill on the Asian markets is poor. I've switched to mornings with Euro FX futures on CME. Regards,