JPMorgan Chase (JPM) Iron Condor

Financial stocks have been strong performers in 2009, but may face headwinds when the first indications come in 2010 of interest rates starting to rise. This option trading idea, an iron condor on JPMorgan Chase (JPM), is designed to benefit from a trading range that allows for the stock to trade nearly 15% higher or lower to March expiration and earn a potential return on risk of 54%.

Iron Condor Trade Details:

JPM is currently trading at $41.15.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. Please note that a brokerage platform that provides for four-legged spread trading (such as OptionsHouse ) will allow the simultaneous execution of all four legs, typically paying one spread trading commission to do so. Additionally, if you so choose, you should then be able to set a limit order for the spread as a whole, thereby securing a better credit.

Iron Condor Part I: Bull Put Spread –

• Sell the March35 put for $0.98 per contract
• Buy the March 34 put for $0.81 per contract
• Net credit of $0.17 per spread

Iron Condor Part II: Bear Call Spread –

• Sell the March 47 call for $0.82 per contract
• Buy the March 48 call for $0.64 per contract
• Net credit of $0.18 per spread

Overall credit for the spread: $0.35 (or $35)

Profit/Loss Details:

Maximum profit: $0.35 (the total premium collected) minus commissions.

Maximum risk: $0.65 (the difference between put or call strikes minus the premium collected). Return on risk is approximately 54% for this strategy.

Upper breakeven price: 47.35 (the strike of the sold call plus the total premium).

Lower breakeven price: 33.65 (the strike of the sold put minus the total premium).

Remember, trading Ideas are generated by the ONN Idea Generating Platform as a starting point for people to begin their own research. Trading ideas are not intended as trading or investment advice or recommendations that any particular security or strategy may be suitable for any specific person. You are solely responsible for your investment decisions, but we hope that some of these ideas will give you a starting point as you look for strategies to employ.

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