JPMorgan (JPM) PriceWatch Alert With 12.20% Downside Protection

Posted on Wednesday, July 02, 2008 8:07 AM

JPMorgan (NYSE: JPM) closed yesterday at $34.02. So far the stock has hit a 52-week low of $32.33 and 52-week high of $50.48. JPMorgan stock has been showing support around 31.55 and resistance in the 35.57 range. Technical indicators for the stock are Bearish and S&P gives JPM a very positive 5 STAR (out of 5) strong buy rating. JPM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '09 35 covered call (VJP AG) for a net debit in the $29.87 area. That is also the break even stock price for this trade. This covered call has a 199 day duration, provides 12.20% downside protection and a 17.17% assigned return rate for a 31.50% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the JPM Jan '09 32.50 Call (VJP AZ) and selling the Jan '09 35 call (VJP AG) for a $1.40 debit. The trade has a 199 day life and would provide 0.35% downside protection and a 78.57% assigned return rate for a 144.00% annualized return rate (for comparison purposes only). JPMorgan has a current annual dividend yield of 4.40%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]