Trade Update $JPM: Closing Half July Put Spread for a Double

by Dan July 7, 2015 11:39 am • Commentary

Back on June 19th we detailed a bearish near term trade in shares of JPMorgan (JPM) targeting the July expiration that would catch the company’s Q2 earnings report (read here).  The thought at the time was simple, expectations seemed high, the steepness of the stock’s ascent likely discounted good earnings news, but failed to incorporate potential risk from a messy resolution to Greece’s debt problems.  Lastly options prices looked relatively cheap, here was the trade from June 19th:

Trade: JPM ($68.20) Buy July 67.50 / 62.50 Put Spread for $1

And I detailed on CNBC’s Options Action:

The stock has since sold off 5% and the put spread that I bought for $1 is now worth more than 2x what I paid.  I am now going to take off half of the position and leave on the other half on but without any risk of a loss on the trade:

Action: JPM ($65.33) Sell to Close 1/2 of July 67.50 / 62.50 Put Spread at $2.10 for a $1.10 gain

At the time of the trade, we wanted to target a pullback towards the May breakout level of $64, a level we would likely take off the other half:

JPM 1yr chart from Bloomberg
JPM 1yr chart from Bloomberg

We will look to add back or possibly roll out on a bounce prior to earnings on July 14th.