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?