Update – $JPM: Spreading April Puts

by CC February 24, 2016 10:06 am • Trade Updates

Dan gave his latest thoughts on JPM this morning. We have an existing short delta trade that we’ll now update and reduce some premium risk. The original trade idea was a put calendar when the stock was $57.30 on February 12th:

*JPM ($57.30) Buy Feb 19th  / April 55 Put Spread for $2
  • Sell to open 1 Feb 19th 55 put at 60 cents
  • Buy to open 1 April 55 put for $2.60

The February puts have now expired worthless and that leaves us with a well financed April put that is currently naked. With the stock now 54.40 those April puts are worth $3.15 (for a $1.15 profit mark to market). We’ll take this break of $55 in the stock as an opportunity to spread the April puts and further reduce our premium risk:

Action – JPM ($54.40) Sold to open 1 April 50 put at $1.30 (vs 1 Apr 55 put already long)
New position – Long 1 JPM April 55/50 put spread for .70 (currently worth 1.80)

Rationale – This put spread is now in the money by .60 and only costs us .70 all the way out to April. Our maximum potential gain is 4.30 if the stock is at or below $50 on April expiration.