Jim Cramer praised JPMorgan Chase (JPM) Chief Executive Jamie Dimon, calling him “The best banker in America,” during the February 24th edition of CNBC’s “Mad Money.” Cramer was also positive on the bank’s balance sheet as well as its overall growth and dividend potential. In short, Cramer is bullish on JPM shares and thinks the stock could rally as high as $50 if the federal government eases up on proposed banking regulations.
Thinking Beyond Buy or Sell
JPM shares were trading at $40.85 at the time of Cramer’s broadcast. When Cramer and other well-known market pundits broadcast their opinions on stocks, investors who prefer to trade options have many different strategies at their disposal, as opposed to just buying or selling the shares outright. Here’s a look at two of the ways options investors might follow Cramer’s opinion (or trade against it!). These are not buy-sell-hold recommendations – just potential strategies that fall into the bullish or bearish camps.
Traders who agree with Cramer and expect upside (or at least limited downside) in JPM shares could consider buying an intermediate-term call butterfly. The investor could buy the June 30/45 call spreads and sell the June 45/49 call spreads, paying an overall net debit of $9.80 per butterfly. Maximum risk for this strategy is 100% of the premium paid (plus commissions). Maximum potential profit is $5.20 per butterfly, minus commissions. This June call butterfly spread will be profitable if JPM is trading higher than $39.80 when the June options expire.
Investors who disagree with Cramer and expect downside in JPM could consider buying bear put spreads. For example, the April 50/40 put spread could be purchased for a net cost of $8.00, which is also the maximum potential risk (plus commissions). The maximum potential profit is $2.00 minus commissions (the difference in strike prices minus the premium paid). This bear put spread will be profitable If JPM shares are trading lower than $42 at April expiration.
Options provide traders with a variety of options, and this call butterfly spread and bear put spread idea are just two of the many strategies you might use to reflect your investment opinion, whether you agree or disagree with Cramer or any other market pundit.
Your Take
Cramer is bullish on JPM. Do you agree with his assertion that Dimon is the “best banker in America” and investors are smart to expect upside in JPM? Or, do you think your money is better spent hedging against expected downside? The comments are yours to add your voice to the conversation.
Image of Jamie Dimon from the cover of the April 3, 2006 issue of Fortune.
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Tags: Jamie Dimon, Jim Cramer, JPM, JPMorgan Chase, Mad Money, Options Trades, Trading Ideas
The possibility exists that JPM Chase stock will seriously dip, IF they don’t settle with Washington Mutual’s holding company, WMI and the WAMUQ, WAMKQ, and WAMPQ stock holders. There was a sign from the court house yesterday that JPM Chase is preparing a final settlement offer to be offered between now and next Friday at 11 am Eastern. If they do not make an acceptable offer JPM Chase and the FDIC will be ruled against, and the proverbial dogs will be let out by the Honorable Judge Mary Walrath, presiding over this large and bankruptcy case. The dogs will include the best BK lawyers; hounds of worst kind, along with the very destructive evidence in hand showing likely “back room”, “unseemly” behavior by JPM Chase and the FDIC as well as ex Treasury Secretary Paulson. These hounds have a bone to pick! Let’s put this to rest and not let it happen again!
biggest crook in banking. GO Banksters!!! Yeah!
Good Luck with that one. WAMU is going to rape them for 100 Billion Dollars. IMO
I agree that he is a successful bank CEO. My problem is how he got there. He has ZERO ethics. In my opinion Mr. Dimon is knee deep in this WAMU fiasco. My extensive DD in the past one and a half years lay’s it all out . I believe JPM and the FDIC are now doing some MAJOR back peddling for their involvement of the illegal seizure of WAMU. I believe JPM and the FDIC will end this via global settlement just to keep Mr. Dimon and other out of jail. All in my opinion of course…
fixedops