Considering Our Options – $JPM July Put Spread

by CC July 13, 2015 1:05 pm • Commentary

JPM is set to report earnings tomorrow morning before the open. The options market is pricing a one day move of just over 2%, which is essentially in line with the average move over the last 4 qtrs. We entered a July put spread in the stock about 3 weeks ago and took off half during the market selloff last week. Here was the original trade and the subsequent adjustment:

original trade June 19th:

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

adjustment selling half on July 7th:

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

Going into the report the balance of our trade is actually a small loser from the entry price. With the stock at 67.75 the trade is worth about 70c. If we closed it now the net profit on the trade would be about 40c. But since we have no risk on the balance of the trade we’re content to let it ride into the event and for the days following this week. If we saw selling into the close that rendered the balance a small profit that could change our view.