By Susanna Moon
Chicago, March 19 - JPMorgan Chase & Co. priced $18.1 million of 0% return notes due Sept. 20, 2012 linked to a basket of two indexes, according to a 424B2 filing with the Securities and Exchange Commission.
The basket consists of the J.P. Morgan Strategic Volatility index with a 65% weight and the J.P. Morgan Strategic Volatility Systematic Long index with a 35% weight.
Each index is rebalanced daily, and the index level incorporates a daily deduction of an index fee of 0.75% per year and a daily rebalancing adjustment amount that is equal to the sum of (a) a rebalancing adjustment factor of between 0.2% and 0.5% per day, depending on the level of the VIX index, applied to the aggregate notional amount of each of the VIX futures contracts hypothetically traded that day and (b) an additional amount equal to 0.2% and 0.5% per day, depending on the level of the VIX index, applied to the amount of the change, if any, in the level of the exposure to the synthetic short position.
The daily rebalancing adjustment amount is intended to approximate the "slippage costs" that would be experienced by a professional investor seeking to replicate the hypothetical portfolio contemplated by the index at prices that approximate the official settlement prices (which are not generally tradable) of the relevant VIX futures contracts.
The payout at maturity will be par plus the basket return, with exposure to any losses.
The Strategic Volatility index is a synthetic, dynamic strategy that aims to replicate the returns from combining a long position and a contingent short position in futures contracts on the CBOE Volatility index, where the synthetic long position and, when activated, the synthetic short position, after being established initially in the second-month VIX futures contract or the first-month VIX futures contract, respectively, are rolled throughout each month. The Strategic Volatility Long index is essentially the same as the Strategic Volatility index, except that it does not have a contingent short position in VIX futures contracts.
J.P. Morgan Securities LLC is the agent.
| Issuer: | JPMorgan Chase & Co.
|
| Issue: | Return notes
|
| Underlying basket: | J.P. Morgan Strategic Volatility index and the J.P. Morgan Strategic Volatility Systematic Long index
|
| Amount: | $18.1 million
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| Maturity: | Sept. 20, 2012
|
| Coupon: | 0%
|
| Price: | Par
|
| Payout at maturity: | Par plus basket return, with exposure to losses
|
| Initial index levels: | 551.51 for Strategic Volatility and 35.19 for Strategic Volatility Long
|
| Pricing date: | March 15
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| Settlement date: | March 20
|
| Agent: | J.P. Morgan Securities LLC
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| Fees: | 0.5%
|
| Cusip: | 48125VPD6
|
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