JPMorgan plans to sell return notes on Strategic Volatility index

By Marisa Wong

Madison, Wis., May 1 - JPMorgan Chase & Co. plans to price 0% return notes due Aug. 7, 2014 linked to the J.P. Morgan Strategic Volatility index, according to an FWP filing with the Securities and Exchange Commission.

The payout at maturity will be par plus the index return, which could be positive or negative.

Holders can request that the company repurchase their notes early. The payout will be par plus the index return minus a 0.5% repurchase fee. The issuer said it intends to accept all requests for repurchase but is not obligated to do so.

The index is a synthetic, dynamic strategy that aims to reflect flat to positive sensitivity to the volatility of large-cap U.S. stocks by replicating the returns from combining a fixed long position and a contingent, scaled short position in futures contracts on the CBOE Volatility index, or VIX index, where the synthetic long position and, when activated, the synthetic short position are rolled throughout each month.

The synthetic long position rolls throughout each month from the second-month VIX futures contract into the third-month VIX futures contract. When activated, the synthetic short position rolls throughout each month from the first-month VIX futures contract into the second-month VIX futures contract.

The 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.

J.P. Morgan Securities LLC is the agent.

The notes are expected to price May 3 and settle May 8.

The Cusip number is 48126D4A4.

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