JPMorgan Chase & Co. (JPM)

Lot 2022-2

Update 4/13/2022: I exited my short bear call vertical options spread on JPM, 37 days before expiration, for a $0.54 debit per contract/share, a profit before fees of $81 per contract. Shares were trading at $127.86, down $6.27 from the entry level.

The Implied Volatility Rank at exit was 44.0%, down 6.7 points from the entry level.

I exited for 60% of maximum potential profit, well in excess of my normal exit point, 25% of max.

Shares fell by 4.7% over one day for a -1,706% annual rate. The options position produced a 150.0% return for a +54,750% annual rate.

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I have entered a short bear call vertical spread on JPM, using options that trade for the last time 38 days hence, on May 20. The premium is a $1.35 credit per contract share and the stock at the time of entry was priced at $134.13.

The Implied Volatility Ratio stood at 50.7%.

Premium:	$1.35	Expire OTM
JPM-bear call spread	Strike	Odds	Delta
Calls
Long	145.00	83.0%	20
Break-even	141.35	77.0%	27
Short	140.00	71.0%	34

The premium is 54% of the width of the position’s short/long spread. The profit zone covers a 5.4% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 2.7:1, with maximum risk of $135 and maximum reward of $365 per contract.

How I chose the trade. The trade was placed to coincide with JPM’s earnings announcement, before the opening bell on the day after entry. The short strikes were set to coincide with the expected move of $4.35 either way, based on options pricing, which gives a price range of $l29.78 to $138.48.

By Tim Bovee, Portland, Oregon, April 12, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at www.timbovee.com.