Eyeing An Iron Condor Set-Up On JP Morgan For Tuesday
JPMorgan Chase & Co. operates as a financial services company worldwide. It operates in four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM).
J.P. Morgan Chase reported first-quarter profit and revenue that missed expectations citing COVID-19 as the culprit. The company missed expectations as of result of building its credit reserves to $6.8B to account for the additional debt Americans are taking on, yet unemployed.
A couple of weeks ago, the Federal Reserve performed a bank stress tests. Under the Dodd-Frank Act legislation for banks following the Great Recession, banks now go through various economic scenarios each year to determine whether they could maintain adequate capital if a severe recession were to occur. As a result of this year’s test, many banks may have to stop paying a dividend. But JP Morgan feels they have enough capital to handle a severe recession and continue to pay a dividend. They have also joined other banks in the idea that the 60/ 40 stock /bond allocation is dead in this environment.
In a year where a classic 60/40 allocation has affirmed the success of this time-tested strategy, JP Morgan is joining the list of Wall Street banks that are calling for its demise in the coming years.
Historically, financial advisers would tell their clients to keep 60% of their cash in stocks and the rest in highly rated bonds, with the idea that the portfolio would capture the dramatic long-term gains achieved by equities, while depending on the “safe” fixed-income assets like government bonds to rally during any short-term drawdowns in the stock market.
“In the zero-yield world, which we think will be with us for years, bonds offer neither much return nor protection against equity falls,” said Jan Loeys and Shiny Kundu, strategists at JP Morgan, in a Tuesday note.
Today during the Leo Podcast we talked about an iron condor JP Morgan trade that @khaleelkazi is about to get out of for a profit. I liked the way the chart was looking that I'm considering getting into an iron condor in JP Morgan.
NOTE: An iron condor is an options strategy created with four options consisting of two puts (one long and one short) and two calls (one long and one short), and four strike prices, all with the same expiration date.
Ideally, I want my strikes to be outside of the daily demand and daily supply zones. And ideally, I want my short strikes have an 80% chance of never being breached. And ideally, I want my expiration dates to be 45 days or less. And ideally, want to a credit that will give me a 25% ROI.
Now according to the option train based on the options that expire Aug 21st, based on the volatility of the stock,
the price is going to move +/- $12, which would mean in theory, price should stay within the yellow dashed lines over the next 8 weeks.
So, come Tuesday when the Markets up and the numbers are adjusted, I will attempt to find a suitable two spreads to sell that come close to meeting my criteria above.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted Using LeoFinance
