Friday, May 15, 2015

JPM: one call, one put

Quick report on my recent options transactions:-

One call: I bought a JPM Jan 2017 60.000 call on 05/05/15.

One Put: I wrote a JPM Jan 2017 60.000 put on 05/05/15.

Net out-of-pocket money is $252.20. 

The purpose of the call is to scoop the benefit of rising prices.  The purpose of the put is to offset partial cost of the call.

Worst case scenario: I get assigned on the put, and no action on the call.  I have to buy 100 shares with the net price per share at $62.67. 

Since I have confidence in JPM, I am not too worried about the worst case scenario.  S&P Capital rates JPM a "buy" rating with 4 stars.  12-month target price is $69, and fair value at $73.20. If we believe FED will at least nominally increase the interest rate sometime later this year or early next year, the prospect of banks is promising.

Ideally, I hope JPM price will go up a bit so I can benefit from the price rising space.  I conservatively put the expiration date into 2017, so I have more time to maneuver.

How do you think of my call/put practice?  Do you think JPM is a safe play here?

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