JPMorgan Chase brings commodities-linked notes, including crude oil and gold notes

By Sheri Kasprzak

New York, March 19 - A surge in commodities may be pushing some recent commodities-linked notes brought to market by JPMorgan Chase & Co., a market insider said Thursday afternoon.

"A lot of times, investors will see a trend and want to capitalize on it," said the market source.

"In this case, commodities are improving, so some investors may want to explore what's out there."

The investment bank announced plans Thursday to sell buffered return enhanced notes linked to the JPMorgan Commodity Curve Index - Crude Oil Excess Return index, said a free writing prospectus released by the Securities and Exchange Commission.

The 18-month zero-coupon notes pay 1.15 times the appreciation of the index up to a maximum total return of at least 40.25% at maturity.

If the index drops by more than 15%, the investors can expect to lose up to 85% of principal. If the index drops by more than 15%, investors lose 1% of every 1% of their principal.

The notes are set to price on March 27.

JPMorgan's gold-linked notes

In other commodities-related notes, JPMorgan sold $2.935 million in buffered return enhanced notes linked to gold.

The one-year notes pay 1.5 times the appreciation of the price of gold, up to an 18.25% return at maturity in a year.

The notes are protected up to a 15% decline in gold prices, according to a form 424B2 filed with the SEC Thursday. If the price of gold drops by more than 15%, the investors will lose 1.1111% for every 1% decline in the price of gold beyond 15%.

The strike level is equal to $917.25, and the commodity closing level is equal to the gold price on the observation date, which was set at March 22, 2010.

The price of gold remained unmoved Thursday at $956.50.

40% reverse convertibles

In other news at JPMorgan, the investment bank priced $759,000 in reverse exchangeable notes linked to the stock of Wells Fargo & Co.

The 40% notes are due in three months and have a 50% protection level.

In addition to the large coupon, investors receive par at maturity unless the final share price is less than the initial share price and the stock declines by more than the protection amount during the life of the notes.

The initial share price is $17.22.

The stock climbed 49 cents Thursday to end the session at $19.24 (NYSE: BWF).

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