BUY the JP Morgan (JPM) January 2024 $130-$135 at-the-money vertical Bull Call spread LEAPS at $2.50 or best
Opening Trade
3-21-2023
expiration date: January 19, 2024
Number of Contracts = 1 contract
USE THE MATH BELOW TO ESTABLISH 9-MONTH OR ONE-YEAR LEAPS ON ANY LARGE BANK OR BROKERAGE HOUSE RIGHT NOW! GO AT-THE-MONEY.
The banking sector has been beaten like the proverbial red-headed stepchild this year. However, it should now be at the core of any long-term LEAPS portfolio.
The best time to pick up this position will be during a market meltdown day and the Volatility Index is over $30.
If you are looking for a lottery ticket, then here is a lottery ticket.
While the chance of winning a real lottery is something like a million to one, this one is more like 10:1 in your favor. And the payoff is 30:1. That is the probability that JP Morgan shares will rise over the next nine months.
(JPM) is the class act in the global banking sector, and CEO Jamie Diamond is the best CEO in the country. Not only that, with rocketing interest rates, we are just entering the golden age of the banking sector.
The regional banking crisis has pulled forward any recession and therefore the recovery. The Fed will certainly raise interest rates by 25 basis point because it is already in the mail. The banking crisis is an enormously deflation event and I expect inflation to be well below 4% by yearend.
After that, there will be no interest rate rises for a decade. The cuts will start in June and continue rapidly after that. That’s when the economic data catch up with the reality that is happening right now, which is hugely deflationary.
(NVDA) and (TSLA) already know this, which are rising sharply today.
And here is the sweet spot. Fears of a recession increasing loan default rates have knocked $20, or 14% off the $145 high in (JPM) shares this year. We are now only $30 above the 2020 pandemic low. When recession fears fade in 2023, interest rates will still remain historically high, and (JPM) profits and share price should rocket.
To learn more about the company, please visit their website at https://www.jpmorganchase.com
I am therefore buying the JP Morgan (JPM) January 2024 $130-$135 at-the-money vertical Bull Call spread LEAPS at $2.50 or best.
Scale in order every ten cents up to $3.00.
Don’t pay more than $3.00 or you’ll be chasing on a risk/reward basis.
Please note that these options are illiquid, and it may take some work to get in or out. Executing these trades is more an art than a science.
Let’s say the JP Morgan (JPM) January 2025 $130-$135 out-of-the-money vertical Bull Call spread LEAPS are showing a bid/offer spread of $2.00-$3.00, which is typical. Enter an order for one contract at $2.50, another for $2.60, another for $2.70 and so on. Eventually you will enter a price that gets filled immediately. That is the real price. Then enter an order for your full position at that real price.
Notice that the day-to-day volatility of LEAPS prices is miniscule since the time value is so great. This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month just entering new orders every day. I know this can be tedious but getting screwed by overpaying for a position is even more tedious.
Look at the math below and you will see that a 3.85% rise in (JPM) shares will generate a 100% profit with this position, such is the wonder of LEAPS. That gives you an implied leverage of 26:1 across the $130-$135 space.
(JPM) doesn’t even have to get to a new all-time high to make the max profit. It only has to get back to $135.00, $5.00 higher than it traded today.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it.
This is a bet that JP Morgan will not fall below $135 by the January 19, 2024 options expiration in 9 months.
Here are the specific trades you need to execute this position:
Buy 1 January 2024 (JPM) $130 calls at………….………$15.00
Sell short 1 January 2024 (JPM) $135 calls at…….……$12.50
Net Cost:………………………….………..…….........…….….....$2.50
Potential Profit: $5.00 - $2.50 = $2.50
(1 X 100 X $2.50) = $250 or 100% in 9 months.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Debit Spread” by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
