Explainer: How a massive options trade by a JP Morgan fund can move markets

[murray t turtle]

Hahaha! Talk about a WEAK argument.
So because JP Morgan is a big firm, all of their products are a good idea to buy?
I bet you can find someone to sell you some worthless collateralized debt obligations that were sold by JP Morgan... cheap!

https://www.theguardian.com/busines...rities-and-exchange-commission-cdo-settlement

Plus, JP Morgan has such a great reputation after all...
https://www.forbes.com/sites/kotlik...the-true-story-of-americas-most-corrupt-bank/
https://www.corp-research.org/jpmorganchase

But it's ok, you better just give them all your money and not try to understand the specific product being discussed. Clearly the key figure here is JP Morgan's total AUM, not any figures relating to the actual fund being discussed as a legally separate entity with its own financials and risk.

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Good points; but with players like Citigroup in that big bank sector, JPM maybe better than C.
C is priced @ $ 46.87\actually with the reverse stock split \ C = really $4.68

 

[destriero]

Wow that fund feels like it's perfectly hedged to lose money in all market conditions.

"Strategy that involves buying put options that make money if the S&P 500 drops about 5%"

"the fund also sells puts that would make money if the S&P 500 drops more than 20%."

"the fund sells call options struck about 3.5%-5.5% above the market "

So you'll only make a little money if SPY goes up and otherwise you lose money (although not as much as SPY)
Unless it goes down 20% and they you losses are worse than SPY?

Yikes. Why on earth wouldn't you just buy bonds?

Dumb author. It's written poorly. You cannot go OTM equidistant on the combo (put and call singles) for a credit due to skew so they buy a put spread (bear) and sell calls outright. This allow a net zero outlay on the overlay. The put side gain is floored at the short strike out of necessity as the put is trading at 35 vol and the calls are at 14 vol. So your goal is zero outlay and your 4% OTM call strike is trading at $30. You price a bear vertical 5% OTM and choose the widest strike width that doesn't exceed a $30 debit on the ps.

So the street has to absorb a bunch of long calls and bull ps.

 

[LM3886]

Not sure if I understand the strategy correctly. Does it involve the following legs: a stock, a long put at -5% strike, a short put at -20% strike, and a short call at 5% strike? The PnL at expiration should look like this: