And, back to bargain - hunting. How about JPM, who are down to $119, which is "only" $350Bn and they made $48Bn last year but $35Bn is more "normal" for them. Inflation should grow deposits and, of course, if we do have some sort of collapse they are too big to fail and they get to buy up their competition for 10 cents on the Dollar. You can sell the 2024 $100 puts for $10.50 and if that's not free money - I don't know what is.
For the LTP:
- Sell 10 JPM 2024 $100 puts for $10.50 ($10,500)
- Buy 25 JPM 2024 $120 calls for $18 ($45,000)
- Sell 25 JPM 2024 $140 calls for $10 ($25,000)
That's net $9,500 on the $50,000 spread with $40,500 (426%) upside potential at $140. Since we're very happy to own JPM at $100, the spread is a small commitment and, if for some reason JPM drops 20% (our puts are still safe) then we'll be THRILLED to roll the long calls down $20 for $10 more ($25,000) and we'd be in the $100,000 spread for net $34,500 with $65,500 upside potential - we can certainly live with that!
When the worst case sounds better than the base case - it's a good trade!
