The month of May has not been kind to $JPM as it wrestles with an apparent bad “hedge” in their London CIO. At some point however, the stock price will find a floor so in preparation for that I have been looking on some longer term trade possibilities.
Earlier on twitter I posted one such idea:
The breakdown for this trade is as follows:
- You go short the March 2013 $34 strike Call for a $4.20 credit
- You go long the January 2014 $32 strike Call for a $6.60 debit
The net to this trade is a $2.40 debit. However, the January Call that you own is currently ITM (In The Money). To further enhance this trade, you could sell OTM (Out of the Money) Puts each week and/or month. An example would be to short the June $30 Put for $.45 cents. With a steady plan to do this, you could easily cover the above debit long before 2014.