EVENT: JPM reports Q1 earnings on Apr 13 before the open, options market currently implying about a 3.25% move vs avg over the last 4 qtrs of ~2%. So in some ways the move looks priced fairly rich….that said I am looking to litter my book with some low premium bearish bets that have near term catalysts…..
-I think the market is at top end of the range and we are due for a few % pull back, so earnings season kicking off next week could be just the catalyst to get things moving again….
TRADE: JPM (stock ref 47.45) Buy the APR 46 / 44 / 42 Put Fly for ~.18
-Buy 1 Apr 46 put for .34
-Sell 2 Apr 44 Puts at .10 (total of .20 credit)
-Buy 1 Apr 42 Put for .04
Break-evens on Apr Expiration: Simply Put [46 lose .18, 44 make 1.82, 42 lose .18]
Upside: stock btwn 46 and 45.82 lose up to .18, stock above 46 you lose all .18.
Downside: Stock btwn 45.82 and 44 you can make up to 1.82…..
Best Case: stock 44 (down ~7% )you make 1.82. bwtn 44 and 42 pay off trails off,
Worst Case: below 42 you lose .18 premium you paid.
TRADE RATIONALE: Savvy Trader rule of thumb on Flies: Look for at least 7 to 1 payout, this one is approx 11 to 1, I like the risk reward here.