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Monthly Income from Option Trade

Income Trade Opportunity in JP Morgan (JPM)

For subscribers, we have been selling puts on JP Morgan (JPM) for several months. We consider this a perpetual income play by selling options for monthly premiums. In fact, we have collected over $1500 in monthly cash during the past 6 months! This is a great way to create investing income that exceed the typical dividend strategy.

As income investors, we seek to create consistent monthly income by selling options to collect monthly premiums. This has been successful for our investors for years. Option selling offers another method to diversify investing strategies beyond traditional dividend investing. We have combined technical stock events with our strategy to identify high returns option selling opportunities. This income trade will generate a return of 13% annual return.

Stock: JPMorgan Chase & Co. operates as a financial services company worldwide. It operates through Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management segments.

We have identified a “Continuation Diamond (Bullish)” chart pattern formed on JPMorgan Chase & Co (JPM on NYSE). This bullish signal indicates that the price may rise from the close of 93.11 to the range of 105.00 – 107.00. The pattern formed over 143 days which is roughly the period of time in which the target price range may be achieved.

JPMorgan Chase & Co has a current support price of 91.28 and a resistance level of 93.19.

The RSI is above its neutrality area at 50. The MACD is positive and below its signal line. The stock could retrace in the short term. Moreover, the stock is trading above both its 20 and 50 day MA (respectively at 92.13 and 89.17). JPMorgan Chase is currently trading near its 52 week high reached at 94.51 on 06/07/17.

Strategy: We want to sell a cash secured put on JPM using the September 2017 92.5 PUT. For each 100 shares of JPM stock you buy, sell one Sept 92.5 PUT for a $1.35 credit or better. That’s potentially a 1.5% return in 41 days or 13.3% annualized return compared to a 2.1% annual dividend yield.

For investors wanting to take a long position in JPM, this lowers the stock price for entry as each premium received lowers your initial cost basis. You can continue to sell monthly put options until the stock is put to you. Then, you can sell covered calls each month for additional monthly income. And, you collect the stock dividend.

This is a great example of how investors can create monthly cash from these income producing strategies. This is an excellent way to create a side hustle income without consuming too much of your time each day. For others, they have built an income large enough to live on without being employed by the man. When your monthly income exceeds your living expenses, you have achieved financial independence.

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Covered Call Write on JP Morgan Chase (JPM)

Covered Call Recommedation on JP Morgan Chase (JPM) currently trading at $31.30.

STRATEGY:  Look at the March 25 covered call. For each 100 shares of JP Morgan (JPM) stock you buy, sell one March 25 covered call option for a 29.40 (31.30 – 1.90) debit or better. That’s potentially a 5.4% assigned return in 32 days.

Risk:   The technicals for JPM are bearish with a possible trend reversal.  The stock is under accumulation with support at 30.11.  S&P rates this stock 4 STARS (out of five) – buy.  The stock has to drop 6.5% to fall to the breakeven level.
Protective Put:  Those seeking more protection may look at purchasing the March 2012 30 put at $3.15.  Sell the put when you exit the covered call position.
S&P Research Notes:  S&P maintains buy recommendation on shares of JP Morgan Chase and Co (JPM).  Q3 EPS of $1.02, vs. $1.01, misses our estimate of $1.10 on higher than expected loan loss provisions.  As we expected, investment banking and trading fell significantly from Q2. However, credit card revenues, net interest income, and mortgage fees were in line with our expectations.  Quality of earnings improved greatly as reserve releases were relatively small.  We lower our ’11 EPS forecast to $4.67, from $4.87.  We also reduce our target price by $5 to $47, based on a slight premium to peers 10.0X multiple on our forward four quarters EPS projection of $4.76.

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