JHEQX
JPMORGAN HEDGED EQUITY FUND SELECT CLASS
Mentions (24Hr)
0.00% Today
Reddit Posts
SPUS down $60 coming from 9% realized vols? Uh oh... 💥 Recapping our SPX Whales + a 🔮into flows / positioning
SPUS down $60 coming from 9% realized vols? Uh oh... 💥 Recapping our SPX Whales + a 🔮into flows / positioning
Options Dealer (MM) Hedging Cheatsheet : Delta and Gamma
Mentions
#"The size of the JPM Option Whale position means that it will dictate market action in the coming week much more than many market participants realize," he says. "All in all, providing gamma to the marketplace will be positive and will tend to drive the stock market higher. No sense overthinking this. The odds favor a move higher." #-Jamie Chisholm #Every three months, it layers S&P 500 index options on top of an equity portfolio that closely hugs the index. To offer downside protection, the managers buy put options with strike prices 5% below the S&P 500's market value.Oct 13, 2025 #Morningstar JHEQX was at 29.50 week of 4-7-2025. This week its around 35.06, moves about a point here and there, higher is good market is up, yeah if anyone has say $25+- billion to gamble for crashing the market come on out high rolla. A prayer for the 0dte mad gamblers, gtfo at a % level, whatever fits to come back the next day.
Glad you understood the 0.18% being RFR. Other people in "that other sub" would have argued too long on that. > i'd come out ahead with bonds guaranteed return should TSLA not be up by expiration I am actually not sure about this with our common assumption of 4.5% and just comparing to TSLA with 32K basis point. Politics aside I understand, hard to guess those things. The way I see it: > so if TSLA goes up 100% (plausible) you lose to TSLA owners/more frequent call sellers. you will win against Bonds at 4.5%. > if TSLA goes down you lose to Bonds, and how bad this loss is depends on other reasonable investments could be made, your 32K could have been spent elsewhere doing "boxes" on SPX or something. for two years the width of the SPX should be reasonable. Because you only get paid 0.18%... Bonds holders get paid 4.5% annually. Now bonds players also have speculative "interest" although it is hidden. If you buy bonds with 4.5% returns, their RFR is 4.5%, but they also speculate "i think interest rate is going down, and the "value" of this coupon will be higher than if i locked in next year, because interest rate will not provide me with this ever again." This is more analogous with the upside you are providing (close to 30%). This is less obvious, because most beginners assume people just want bonds because it pays 4.5%. But we all speculate on the value of our investment beating other peoples' or our own benchmark. When you actually play and find these it makes you appreciate bonds (and or just normal SPY/VOO regular buys) more. Really for RFR there is only bonds or boxes. But for boxes I understand SPX is too high. You could try RUT, their being volatile means you could probably find these oppos too. There are some automated scanners on these. But you cannot do it on stock like SPY, must be on the actual indices like SPX. Either that, or we start embracing risks. Other than that, it's minuscule and or competition is very hard. You could also sell risk-ed collar every quarter. Think about JHEQX for individual accounts. > i've encountered is how to minimize my borrowing costs because i can easily scale this up to 5x my Net Liq Value due to the near nonexistent buying power reduction the collar has on portfolio margin. I am actually not sure how this works... I am in Canada, so I could buy 3x (20,000 margin for 10,000 liquid cash) just from paper application alone. Are you talking about **lambda**? I think for the most part the short call and long put cancel each other out; and this is a covered call anyway. A long "naked" put has the leverage of whatver the delta is saying, because there is no stock. So this probably has about 30-40 delta being so close to current price. But you counter that with having shares and short call... Just looking at the "Share + Short Call" portion for a moment here: At 32K, the NLV probably stays close to 96K, but this is not static because it depends on the valuation of the shares. And this is not risk-free, definitely speculative. The mathematics is not as straight forward because when you have a margin account, the valuation changes. Yes you have the put side, but until these are closed and or exercised, the valuation of the shares will determine your net value... But ok, still though, you spent 32K liquid cash for this and earned guaranteed 0.18% in two years, so even at 160K, that 0.18% is a play to make 0.90% RFR. That's still way below bonds and below stock holders. The 1-30% is speculative. I get it you *probably* will get the short call blasted by mid 2026. But in theory, this is speculative. So I do appreciate your ability to accept this 0.18% thing. Others on other sub wouldn't get it, and I would get PM in 18 months telling me "see i told you so" lol. If we are talking about $100K+ net liquid cash, I really still urge you to just use boxes scanner. 4.5% per 6 months should be doable with current volatility and patience IMO... > the actual challenge with this strategy i've encountered is how to minimize my borrowing costs because i can easily scale this up to 5x my Net Liq Value due to the near nonexistent buying power reduction the collar has on portfolio margin. Yes but if you go long bonds you could also get 4.5% on your 32K, without needing to use any margin. If you use that conservative 2:1 BP, you could also get 4.5% on 3x and that smokes the 0.18% RFR you are seeing now. The only way it is even remotely appealing is we take the speculative returns as a fact; but again though a) I probably have something more to say when you explain the concept of 5x leverage to me, I just cannot work it out; and b) For 30% returns if TSLA or NVDA blasts through +100% in 18 months, you technically lose to just sitting it out with your stocks/margin-bought stocks.
Markets kind of got ahead of themselves, in large part due to the chaotic and inconsistent nature of the administration. Once that initial scare happened, and then the administration softened their tone, we started going back up, and then some short-covering began, which fueled the fire to the upside even more. But, now that we've thoroughly shaken out an initial reaction to the tariff situation, now we get to wait to see the actual real world effects start to trickle into the employment numbers, consumer spending, and ultimately, earnings. Once a negative trend has been established there, then yes, longer term bear market on. We will likely enter a period of stagflation for many years to come after that. We'll have some growth after an initial slowdown, but we'll also have waves of inflation that kind of offsets the growth, so main street is once more the one getting pinched. Look to the trends of the late '60s thru early 80s--look at fed funds rate, unemployment rate, initial jobless claims and SPX all overlaid one another in that period.. That's more likely what we're about to restart. That is bad news for long term equity holders. You won't be able to any longer rely on just buying and holding SPY or quality individual stocks and expect it to just sit for 30+ years and be a great payout. The last 40 years were great for ever decreasing interest rates and ever appreciating asset prices. They also weren't so great for a good deal of the middle class as they get priced out of owning homes and such, but the cost of some goods has come down greatly to somewhat offset that (until recently). Active management will be the only way to get ahead in the years to come. As for the immediate future, tomorrow is a major monthly SPX options expiration, and next week on the 20th is a major VIX OpEx with massive exposures that can pin us around certain levels. As those roll off, we'll enter another period of price exploration with the potential for more downside. Although some of the GEX exposures I've looked at kind of make it seem like we could stay bullish through June 20, although some of the weekly bets for the second half of May are showing SPX at least with some big negative gamma exposures right at the levels we're at now--so--maybe we get some downside to end the month but then start to creep back up again. We'll see! Always possible that if we do start heading down next week that the June monthlies start to build more bearish exposures and we keep going down thru that June expiration--then there's the quarterly expirations that can keep us pinned at a level until they roll off, too. This has been a wild quarter if you watch JPM's JHEQX collar trade. It rolled 3/30 to: 5905 short calls 5310 long puts 4480 short puts The trade, as always, starts the quarter smack in the middle of their upper two strikes by design. But, within days, we were half way between the two put strikes and have since rallied all the way back to the short call strike and we're only half way thru the quarter. THAT is WILD. People like to take bets, the pin and pulling effects of the huge JPM trade, we do often end up ending the quarter close to either the short call strike or the long put strike. If the 'window of weakness' we're about to enter does make us take a bearish turn, there's a strong likelihood that by June 30, we end near 5310. Also plausible that we correct back down from the extreme up move in recent weeks to end May, and then grind back upto 5905 to end the quarter. Also, not unheard of to expire about 5% above the short call strike in an extra bullish quarter. We'll see! I'll wait for the VIX OpEx next week to feel out what direction the market is likely picking for the next couple weeks at least.
Well, the last time we had a quarter where the strikes were down at all from the previous quarter was Q4 2023. Before that? Q4 2022. Both quarters would end up being local bottoms in October. Of course, if we're just starting a real bear market, then this could just be the first quarter in a string of several that continue bracketing us lower. 2022 was 4 quarters in a row of JHEQX stair-stepping lower. Strong bullish move today so far. Interestingly, for how strong the up move is, VIX is holding strong at 22. We have contracted some since the open, but for how big of a move this is, I would have expected more vol getting pulled out. That's one thing that makes me think a little on the bearish side. But, a lot of other things are pointing to bullish for now. Divergence in VIX from its highs near 30 a few weeks ago, we have a lower high. $HYG and Bitcoin have seemingly found support here, and we got a double-bottom in SPX. A lot of things have the appearance of sellers having run out of steam, buy the dip mode may be back. Short term, I think we could have enough to keep going up. For how long is the harder question. A week or two? Most of the month? Not real sure. I do overall feel that this is the start of a longer bear market. We're possibly starting a solid bear market rally that will have more legs than what we've seen in recent weeks to the upside, but I'm not at all confident we get back to all time highs this year. But it's very tempting to be bulled up for the rest of the week, maybe next two weeks, or even all the way to the major April monthly expiries, we'll see. Up, for now, though--just adding fuel to my conviction that the official tariff news on the 2nd will be the market potentially rallying hard because while the market doesn't \*like\* tariffs, we've already priced them in, if not over-priced in that possibility. Adding some certainty back into the equation with solid details and deadlines on when things take effect can actually help bullish flows for the time being along with having a massive amount of bearish trades rolling off today. Markets and businesses don't like uncertainty. Even if it doesn't like tariffs, adding certainty back to the tariffs being enacted--knowing exactly what they will look like and when they take effect can actually be very bullish for a little while. So, while some people may assume the news is going to smack us back down, structurally it looks like the market almost won't have a choice but to go higher from here for at least a little while. Bears will need to tread carefully for a bit.
JHEQX roll led to dealers having to cover a bunch of shorts.
Yes, this is a massive trade that everyone sees coming. Definition: The JPM Collar trade refers to a strategy used by the JP Morgan Hedged Equity Fund (ticker: JHEQX), which manages risk on a long equity portfolio through a large options collar. Each quarter, the fund rolls into a new collar position, and the size of these trades can have a noticeable effect on market dynamics. To establish the collar, the fund typically sells a call option 3-5% out of the money and uses the premium to purchase a 3-5% out-of-the-money put spread. At quarter-end, the existing collar expires, and a new collar is implemented to hedge the portfolio for the upcoming quarter.
This is how "they" get you. Come Monday morning you're scared to buy puts because it's already way oversold. Same thing on the way up with calls and thinking overbought after a SPY +3% green day. In any case, Monday is also the day of the famous JHEQX collar roll and the short put strike is at SPX 5565. Volatility will go both ways solely because the notional amount to hedge is so large. Also EOM fund rebalancing. In any case, bers already feasting. No real "trapped" shorts yet.
Systematics. QiS. Overwrites. Big funds are the JHEQX and the two smaller ones that leave a pretty large footprint on SPX. and QYLD is a pretty big one as well. But these funds are everywhere and quite large. Yield stacking basically. Start googling terms, tag me if you get stuck.
JPM gonna make sure SPX stays below 6055 through Opex due to JHEQX collar position. 🦀 this week. 🎅 next week
JPM collar trade quarterly roll. JHEQX, take a look.
Just a whole lot of flat while JHEQX gets rolled off
the main problem with tracking OI is not being sure what the OI is from, an example is the JPM Collar done for JHEQX, usually the trade is around 50k calls at one strike and can look like a big bet even though it's a non-directional bet where they don't care how it moves. But with such large volume, it could act as a support if market pulls back next week
yeah so the main difference with mutual funds these days is not even the fact that ETF - like the name suggests - is exchange-traded.. Some mutual funds like JHEQX is exchange traded too. But I would say it's in the costs and clarity. When you buy SPY you know the performance, when you buy BTC you know the performance will track BTC... So you don't need to worry too much. With a mutual funds there may be lack of clarity over what they do + high costs. Because of the high volume and liquidity, ETFs is cheaper. Even ARKK has "only" 1% MER.
BRK-A does not have options chain. Can't sell calls against it. BRK-B is the better option IMO. Neither will beat SPX, but the defense/value stocks will probably hold up better for bear markets. (They were doing alright till march 2022)... I would do BRK-B 75%, 15% JHEQX (for the excitement), and 10% JEPI/QYLD. Sigh... If I had 7-figure money...
>JHEQX 1 Year 3 Years 5 Years JHEQX 15.42% 6.66% 8.72% S&P 500 Index 13.84% 9.76% 12.51% Those are the returns compared to S&P index. Not too bad of a drag, but they have their hedges on all the time. I'm trying to use the hedge more selectively. If it drops 30%, would remove the hedges and buy more of the underlying and ride without protection.
You’re doing exactly what the JPM hedged equity ETF does. JHEQX. They own a bunch of equities and buy SPX put spreads at 5%/20% OTM and sell calls to make the entire thing net zero cost.
have you seen Put premiums for 2 years? puts are generally too expensive for index because people use them like you, to protect against that 20% drop. this bumps up the pricing as more and more people buy in. when done "naked", you have all the drawdowns without the upside. if this 20% happens on the second year, bye bye value, and since no share to back this potential short, you just parked big money for nothing. if this 20% happens in the first year, you may win 20%... after parking for one year. the only way puts could be worthwhile is if you do it quarterly a la JHEQX. Sell calls against your port, and buy OTM debit puts. Probably not going to beat SPY alone, but neither will "married puts" to be honest.
New $JHEQX prelim strikes for Dec 29, 2023 ...might be adjusted: $SPX calls 4500, Put Spread 4050(long)/3410(short) 41,000x Collar gang good or bad?
Pin to the JHEQX collar, then at least see a minor bounce there, if not bottom for the year.
FYI - JHEQX SPX 4,210 9/29 if you know, you know
the average price is concerning... very possible to lose if he is using margin on this. If not, ehh... NVDA is not going anywhere. Could also sell monthly collar if they collapse a la JPM JHEQX.
BEP for long put holder= Strike - Premium. Skew is not so much about the b/a, but about Call v Put at the same delta. Those quoted strikes were live prices. You could see comparing similar delta puts tend to carry a lot more premium compared to call at the same delta. 4350p at 74.60 -> BEP 4276.40 on expiry to make you as the holder have a choice to dump or just let expiry. This is what I meant by "expensive", either as a protection or as a speculative play. If SPX drops to 4300, your put will be worth 50.00, but you bought for 74.60. But OK point taken, it's an insurance. But still you lose money compared to just dumping the shares without ever buying that put unless it goes below 4274.59. Volatility spike does not matter when you plan on holding till expiry (or close to it); because at 4pm expiry, the put will only move $1 for every $1 ITM... You keep on mentioning volatility spike + buying SPX and not SPY so I thought this was a piece of speculation and not an insurance to dump the shares on expiry. A quarterly collar (again not to egg you to buy JHEQX but their method is famous)... could work like this... Sell covered calls for -1 unit, then buy put debit bear spread way OTM for +0.3 unit . You pocket credit for -0.7 unit. The put bear spread would be placed where you **absolutely** don't want SPY to go... because at the end of the day we are happy with -5%. Those are just normal returns. Don't place the bear put too close to underlying, because if you start the collar with a debit, if the covered call is exercised you lose shares and this debit. This should not be done yearly, but I would say 45DTE-90DTE. If sideways, great, you keep shares, and premium from the covered call - put bear spread collar. If it goes down you sell the put bear, keep covered call premium, then dump SPY. If it goes up, covered call is exercised, you either roll or let it assign. Because you do this 45DTE-quarterly, you should be able to enter for a reasonable credit, and repeat as necessary. This should satisfy your "participating on upside/sideways/modest L, but protection when 20% drawdown happens." I don't actually have affiliation with JPM/any funds... just found their method interesting for wealth preservation more than growth... At 1000+ SPY shares, yeah I get you... wealth preservation matters more than beating the market. That's where collar comes in.
If protection then you must buy SPY. You dont need to buy JHEQX but follow their collar methodology as opposed to yearly puts that are expensive **especially** when treated as protection. Expensive does not mean “you cant afford this.” It just means “based on the likelihood and skew, for what it is chances of SPY hitting BEP is low.” They dont buy this yearly because as professionals they know how expensive puts are. The gain should be similar to JHEQX on the sideways, but you would lose on the upside. I am using this as a comparison because they are most famous with their credit collar move. When looked as a speculative move, quarterly makes more sense. Drops 2% it gains 20%. Yearly would have gained 5%. When looked as a protection, quarterly also wins because you are probably much better at finding bottom in shorter term. Because they are cheaper when you roll it is probably cheaper than buying a yearly once, and the probability of you hitting BEP is higher. Again if you look at those real quotes today, read that investopedia about put skew and still think yearly put is more sensible than quarterly collars, I dont control your purse.
I'm always trying to find flaws in my investment approach, which is why I'm sharing my approach on r/options. My goal is to find the cheapest bid-ask and lowest time value (extrinsic) cost for S&P 500 put options. I think our difference boils down to me viewing put options as protection for underlying SPY shares, and you viewing put options in isolation. In isolation, there might be costs that are 50% of the put's value. Compared to the underlying, that's like 2% of the underlying's value. Not sure why you're talking JPMorgan Hedged Equity Fund (JHEQX) after I stated I will not buy it.
you could do the same with JHEQX-style quarterly collar, and you could in fact profit as you roll and close the winning side. > https://optionstrat.com/build/custom/SPY/x1000@375.00,230929P425,-230929C470,-230929P380 if you are going to actively roll up and down, quarterly ala JHEQX would fit what you are looking for more... Participate on the upside, but capped downside. by the way, you don't really have to convince me. I am not in access to your account :P. I will just say this, when comparing same delta, puts tend to be more expensive, and the skew grows wider as expiration gets longer. https://www.investopedia.com/terms/v/volatility-skew.asp Practically everyone who has enough assets to protect through put (and not just by selling off and derisking, which I did recommend earlier) think the way you do and this inflates put price. This is one reason why long-term puts = free money for the house. Unless accompanied by short calls/short puts to reduce BEP. Ex: Delta 24 as of now, expiring today: 4630C 10.60 4515p 12.20 Delta 25 Dec 29 4350p 74.60 4890C 51.40 The puts are up to 40% more expensive the longer the time horizon. This is not to say "heh he does not count on me ready to lose that." I am saying taking this into account the BEP is too low to profit. So to recap: 1. I did follow your plan, but due to skewness and long-term expiry, this is not likely to profit, and in fact you could lose on both the long and the put. It's not that it's expensive for you, it's expensive for the move to profit in most average scenario. 2. I am more on the 100-200 SPY-asset guy. For super-small fish like me derisking and selling off when I fret is more beneficial than buying puts. Even better is to just keep on buying on way down. At 1000, I could see why you are insistent on buying puts. However read the link + (1). 3. I would sell JHEQX-style **quarterly** collars if not swapping to JHEQX etf right away since you are OK with reduced gains anyway. MER be damned, who cares, you know even managing alone will not get you 100% of all the upside due to this put. I would be making sure the put debit + short call premium = credit. If your broker is smart, the SPY should be able to be put against SPX short call "almost synthetically", because their correlation is quite close to 1. The Put debit then protects you up to 15-20% down. On sideways, you can just roll the collars up or down. This reduces the put BEP, and there is a chance you could end each quarter with profits most time. Remember they need a reason to drop 20%. 4. I don't control your purse. You seem intent on convincing me to approve your plan. I am honoured, but I am just giving you feedback based on my experience as mostly a seller. Had I got 400,000 asset, I would (almost) totally call you up and sell you the put myself. Except I wouldn't because 6 months is too long, 30-45DTE would be more like my region.
Sorry for confusing you I was on the bus before. There are multiple outcomes for you: 1. Meltdown to your put BEP between now and 6 months from now. Dump everything and sell the puts. You likely still make money. Beat DCA/Holders. 2. Sideways: your long put will lose extrinsic value, and by the time it hits BEP in 2025, there will be no extrinsic value left. You only make $1 per $1 SPX move below your BEP. Not to mention you cannot dump the SPY shares. You withhold thousands of dollars (especially as you roll the long put up), only to make $1, and still holding SPY. 3. Melt up from now to 2025, with perhaps *then* they go to long put BEP. Again, $1 or 1.5 per price SPX moves lower than BEP. If you bought 30 delta today and SPX moves to 4800 in December, then your 30-delta put's decay and value loss will accelerate. Then even if SPX stabilises down to 4600, there is no saving once these puts lose enough extrinsic value. If SPX melts up, you don't just want them to pull back a bit, you want them to melt down to revive the put. Repeat ad nauseam as you roll up the put. 4. You could treat this long put as an insurance when you see a hyper green day (>0.5%), but I would buy a quarterly put and not LEAPS put. Since you are not looking to dump SPY anyway, you could sell this quarterly put at 10-15% gains because then the % gains will be good if you are right, and cheaper if you are wrong. If SPX moves from 4000 to 4040, you would buy SEP SPX 3950p. Then when SPX has a red week, dump for either profit or close to BEP. If you profit, you could roll down to 3900P the next green day. 5. On JPM Collar, the expense ratio is only 0.58%. I don't know if it being mutual funds should disqualify the purchases. They are doing a step beyond what we do. Their top picks hopefully beat their short calls and debit put, but in case they don't you will still profit and accrue dividends at 0.98%. 6. You could copy what they do too if you are not convinced on buying them. Sell SPY covered calls quarterly 5% OTM, then buy put debit on SPY 10% OTM put, 20% OTM short put. Make sure they end with credit (covered calls premium > put debit). The difference is that with JHEQX, because they buy select equities only, if their picks break 25% in a quarter, they could still be profitable. They would pay off their SPX short calls, and roll the whole thing another quarter. On the downside, they could lose more than 20% in a quarter, and the put debit will not protect much more. With you, if SPY goes up 10% in a quarter, you will forfeit that upside to the covered calls, but you will be protected through your put debit at 20% loss no matter what. I thought JHEQX mechanics would be in line. At 1000 SPY shares, selling collars would make sense. 10 to 100 shares, just a drag. I think the issue with hedging with options is that as amateur humans we just don't know when to stop. Especially with you because the two are not exerciseable. In the long run, hedging will be net loss - especially since you plan on rolling the put **up**.
I undertstand why portfolio insurance, without other context, makes you think of a risk averse investor. Back in 2022 Q4 I recall holding put options waiting for an inflation print. In my rough estimation, the odds were good I'd take a beating - very low chance to profit off my puts. I can't sell options in the pre-market... so I hedged my put option exposure with opposite 3x ETFs, like buying UPRO to prevent losses in my SPY puts. It worked - I avoided losses, but my broker marked me as a "pattern day trader" for churning my portfolio. I'd say my risk tolerance is higher than most investors. (But not compared to options day traders) What I lack is confidence in my thesis. That's why I want protection from market drops while participating in upside. According to JHEQX's website, it is a mutual fund. They charge a 5.25% load for class A shares, and 12b-1 fees for all classes. I'm not interested in their selection of large cap stocks, and almost never buy mutual funds. "Almost" because I make an exception for PSLDX, which had a similar drawdown in GFC (2008) as S&P 500, despite leverage.
You could buy JHEQX etf by the way... They do these collars quarterly. They manage it well enough that the profit is comparable to your target. https://am.jpmorgan.com/us/en/asset-management/adv/products/jpmorgan-hedged-equity-fund-i-46637k281 There is a realistic pathway - otherwise they wouldn't be doing this - for their holdings to outperform SPX, and so even on the way up, they have enough funds to close their short calls. If you have SPY and sell collars on those, you will lose to them because the short calls will be called out. With them, they just try and choose good stocks. If the stocks over-perform SPX they will have enough money to close the SPX short calls, and if they go sideways, the returns are comparable to SPX. If they go down up to 20%, they are protected. Probably closer to your risk profile. Notice how they underperform SPX by design because their put debits drag their holdings down.
both of you are respectable. Hedge funds rarely beat the market because they rarely go all in on these options. The hedge often times just drags the performance. If you are already living off dividends and rich, this is good. Think about the JHEQX. They buy equities that they hope will beat SPX short calls they make. Yet on the downside they hope these stocks don't dump harder than 20% so they can be comparable to SPX's dump. If they didn't buy the put debit, they would have made more money. But that's often not the goal. It's preserving wealth and dividends. I can also appreciate going all in or bust - when you have nothing much to lose. When you barely have $100K in assets, the best hedge is by making more money. I would not have bought this put at least not with this amount, given the expected move and greed level. I would have bought 1 SPX 4410 just for the heck of it, or pair it with an OTM Put Credit Spread. This would have created a ladder that would have worked well this morning. It is still a bearish trade, because the 4410P would have made a lot more money faster than the PCS portion of the ladder. If it is lossporn-worthy, you are going overboard.
JPM has this flagship hedging ETF called JHEQX. They will buy top equities they think will go up along with SPX (high beta), and then sell SPX collars every quarter. 2.5% OTM short call, and then 5% off put debit spread. Essentially this is like "synthetic" covered call because they are guaranteeing the collars with the value of their equity. I reckon most of the hardwork is in choosing the equity that actually reflects SPX moves or better on the upside to reduce losses. The collar choice is almost methodical. Right now the short call is at 4300Cs ending on Friday. We are not talking about 1-2 short calls, we are talking about 1000+. And because this is not 100% S&P500, they (MM and JPM) need to figure out ways to cover or roll. How can you cover SPX short calls? You can buy stock or index futures, as well as buying actual SPX calls. I suspected the sharp rise and down yesterday was due to it.
cost basis? I reckon if this is $0.5 per it's not that bad. if we are close to 4300, JHEQX will try hardcore to pin this to 4300 by Friday. If we open and close super green tomorrow, they will be under pressure to cover those short calls, which could in turn help you.
I'm curious if there are any opinions one using 2 legged or 3 legged collars to protect positions within a tax advantaged account. Say hypothetically one has 1000 NVDA shares in a Roth IRA. - 1000 shares of NVDA at current spot $220 3 legged collar (similarly in concept to JPM's JHEQX) excluding commissions: - 3/24 250c 10x sell @ 6.70 = $6700 - 3/24 200p 10x buy @ 7.90 = $7900 - 3/24 170p 10x sell @ 1.94 = $1940 7900 - 1940 - 6700 = -740 For a cost of $740 dollars, one would lock in profit if the stock goes past $250, and be protected reasonably below $200. Any obvious downsides other than tanking below $170? Since it's tax advantaged, you don't incur any taxes if get called away at $250.
Curious, has anyone actually put on their own large share positions a 2 legged or even 3 legged (ala JPM JHEQX) collar? I'm thinking about it for some of my MSFT/NVDA positions as 2022 beat the shit out of me for these and I won't make the same mistake again.
I made changes in the text and made it clearer that one will not become TeH KiNg oF GaMMa SqEeZes. Also made less references to "options dealer", though still confused af why this is considered a scammy term. I still disagree that the format of the cheatsheet plays into the mind of someone wanting to game MMs. I would rather keep it all pertaining from a MM perspective and if someone can't understand that one extra level of cognitive load means you are the opposite despite despite the details, then shrug. I would take this chance for cleanliness of the spreadsheet. Is understanding why strikes of the famous JPM collar (JHEQX) can cause the market to pin towards strikes and large OI mean someone wants to "game MMs"? I would argue in fact knowing the mechanics of "how and why" the pin can happen does gives someone trading edge with not YOLO'ing near those expiries way OTM away from those strikes.
OP should also look up a "Seagull spread". Per 100 shares; Buy 1 wide ATM vertical put spread and sell 1 OTM call for a credit to pay off the cost of the vertical spread. More or less it will limit your upside potential but greatly dampen any losses. JPM runs this strategy under JHEQX. Might be a simpler trade than the one initially proposed.
New JPM collar ($JHEQX) which rolled on 12/30: Short 4030C Long 3600P Short 3040P They were long 3850P with the previous collar, which helps supports the range bound behavior this past December.
Pinned by JHEQX? Drill when they roll?
Predictions for next JHEQX strikes?
JHEQX magnet at 3850 Dec 31 IYKYK
Yes. Ask the JHEQX fund about that. Probably the single most overrated quarterly collar in the market, and used solely for drawdown insurance.
JPM Collar Sept 30th, 2022 (fund name JHEQX) - 4005c (sold, cap your upside) - 3580p (bought, protect downside) - 3020p (sold, because odds are you don't need that much downside protection) Look at the OI for the SPX strikes on this date and you'll see it jump out at you. Like 45K OI. They opened this position around 3 months ago (I forget what SPX was at that time back in June) and it's rolled quarterly depending on where SPX is at that time. Think of it like this. Fund wants to provide downside protection for its clients. Ok, buy puts (3580p). But shit, this costs money. Odds are, we don't need "that" much downside protection, the world would have to get pretty wacky to go lower and we'd have bigger problems then, so let's sell a further strike on down (3020p). Fuck. This STILL costs money even if it's reduced costs and we can't have that. How can we make this downside protection free? Let's sell a call (4005c). Arguably "free" downside protection at the expense of capping your upside. The notional impact of this many OI is not trivial due to MMs delta hedging. Think like $10B. So the idea is MMs in order to delta hedge will "buy into the weakness", meaning buy shares as market goes down, and "sell into the strength", meaning sell shares as market goes up. The strikes can theoretically act as a magnet. The collar is so well known by this point though, and I've read that it's impact is muted by other fancier stuff like trading ITM calls that I don't fully understand. Still something to keep in mind as I've also read they also they delta hedge this in one shot on expiry day. More in depth reading: https://spotgamma.com/call-aaa-santa-claus-is-having-sleigh-troubles/
JPM rolls their collar every quarter. They rolled at the end of Q2 which ended in June. The current collar is set to expire on September 30th. Here is the positions https://preview.redd.it/76e01q3h8t891.png?width=770&format=png&auto=webp&s=8e0d8ec4a4398bd8063bc0ed30386c26aae7a1a2 You can look it up by tracking the trades for JHEQX. as you can see this is a bullish collar.
JHEQX is bearish. They sell an OTM call and use the proceeds to buy a put vertical. The OP's trades don't match that though.
In my opinion, 5/20 was probably a repeat of the invasion low and people expecting a May FOMC repeat are probably on their way to getting pantsed next week. Some of the last part is hope, but there’s real reasoning behind it being possible that a May FOMC repeat does not come to fruition. May FOMC was a one-day options squeeze that got followed up with that getting reversed along with a hedge fund getting liquidated (confirmed). June on the other hand is more comparable to March even if the macro situation has seemingly worsened since then. A quarterly OPEX is always big and this one is skewed to puts, the rebalance favors stocks, and JHEQX for whatever reason has led to flows that support the S&P for a stretch the last couple times. There are definitely reasons for this to fail, but I really hope it doesn’t as I want to see some confusion at the end of this month (we crashed after FOMC last time! Why aren’t we doing so again?). Now I don’t know if 5/20 was “THE” low of lows. I don’t think it was, for now there’s only one real reason it can be (the S&P’s weird history of trading into bear market territory, then not closing there and either not seeing those lows again or not seeing them again for a long time).
My thoughts exactly! Thanks for fleshing it out more. Those JHEQX (JP Morgan hedge equity firm) flows are what catapulted us in March and December. Either rVol has to reach IV (Black swan crash) or we just base and iVol comes down (VIX hedge + JHEQX end of quarter flows) and we get a rally to June 30th.
I’m a bit late to this (thought about posting here earlier but forgot), but this is one of a few reasons why the June FOMC setup is closer to March than May, unless the market continues to rally. Big quarterly OPEX, where the big guys are going to have to shift their positioning around, which could cause a move higher. Rebalancing. The JHEQX roll (this is a weird reason but the last couple times this happened, you had geeks frontrun it, and it’s kept a strong bid under the S&P for the week after OPEX week in December/March). I’m fully aware that I might get pied in the face because I did think that we’d see some further relief after the past FOMC day and as we know, that didn’t happen. But if this turns into a one-off rally week by the S&P and it undercuts 3810 in the next couple weeks, I think we end up with the March like outcome instead of May post decision unless something that is a lot more hawkish than what we think we're going to hear is said. All this blabber may be invalid if some NYSE indicators hold though. We might be in the midst of a push like that now. Think if I traded and preferred the short side, I’d probably prefer that Friday last week be a multi-week low and would lay off for a bit longer outside of intraday. Think if we go into the meeting at 4300, it’s more likely we get killed after that. If we don't, then I don't know...it's probably a coin flip this time for real unlike May.
It was never 50/50 after the March meeting on us seeing 50 in May. The main reason why the market popped then was because of external circumstances. Quarterly OPEX, rebalancing, and the JHEQX roll...which even if it shouldn't, has oddly kept a strong bid under the S&P until close to roll time for the last couple go arounds. Speaking of which...all of this is a factor for June and it's very possible that folks that have been trained to sell every single little rip since that economic roundtable on April 21st are being led into a slaughterhouse in June, especially since summers are typically a low liquidity period.
You’re probably going to see a multi-week low made early on FOMC week in a month despite a probable QT announcement, even though it will make 0 sense just like how it made 0 sense that a multi-week low was made on March FOMC week when a rate hike was announced. It will just be because of technical reasons (quarterly rebalancing, monthly and quarterly OPEX, and the JHEQX roll, which has oddly kept a strong bid under the S&P for the past couple times until the roll occurred, which is odd since it’s not a big fund, but it gets frontrun); June is set up a bit more like March instead of May due to them. The million-dollar question is where it is going to come from and frankly it could easily be from the 200 week on the S&P (3400-3500) because multiple things that could help out all look absolutely terrible right now.
Just because something is less than $20b in assets, doesn’t mean that it can’t have an effect, because it has lately. There were people commenting about how the S&P futures had a strong bid underneath it on the week after FOMC last time, and the only two things that you can really point at is the JHEQX collar roll getting frontran by geeks, which would explain the strong bid (only for them to take their profits on the day it’s rolled) and rebalancing. Now maybe this doesn’t work this time (I did say that this could look very bad in a little less than a month) but I suspect unless Powell says that they are going to outright sell treasuries, that the next FOMC meeting should trigger a multi-week bottom like March instead of what was seen in May.
JHEQX seems to have less than $20B in assets, how can it have such an outsized influence on an index?
"But I swear when the next rate hike happens the market will drop another 5% as if it was a total surprise." This may look completely foolish in a little less than a month, but I think there’s a decent chance that the next FOMC ends up more like March instead of May simply because of where we are at in the calendar. Big quarterly rebalance and OPEX. JHEQX roll that will probably keep a bid underneath the S&P for a while. Sadly… - This would largely be about technical reasons doing this and not good news. - It may come from the 200-week moving average if this pattern of there being at least one day like Wednesday per week doesn’t quit next week and that’s another 400-500 points down.
Likely not going to get another multi-week low in any index until FOMC next month. And this is not necessarily calling for the Fed to cave at that meeting either. June is a big rebalancing month and people are likely going to frontrun JHEQX's collar roll again. Likely causes a big pop. But before then, some records are going to be broken on a weekly basis, and after June wraps up, we'll likely resume straight down only and to the right until the Fed chickens out.
>big collar trade in market, looks like a JHEQX type Large macro hedge: SPX Jul29 3320/3940/4385 put sprd collar bought 12.7k times vs 7k of today's 4000 calls. Will create $3Bn for sale into the close, $5mm vega for sale. What does 5mm vega for sale mean?
From traders: "big collar trade in market, looks like a JHEQX type Large macro hedge: SPX Jul29 3320/3940/4385 put sprd collar bought 12.7k times vs 7k of today's 4000 calls. Will create $3Bn for sale into the close, $5mm vega for sale." Hold onto your butts...
JP Morgan may, and I do stress "may" have fcked things up today in the S&P futures today with rolling their collars in JHEQX. The reason that I stress "may" is if this was JHEQX then a lot of this is going to be getting undone tomorrow. This was a problem on September 30th last year, and the next day, the S&P made a lot of it disappear. While it probably isn't the only reason for that MOC order that I've seen, it may be a lot of it.
Here's an interesting thread: https://twitter.com/perfiliev/status/1506437517872185349 This is how big macro funds are looking at the current gamma situation. That thread specifically is referencing the gamma impact from the massive SPX collar that JPM has been rolling quarterly for its ~$20bn hedged equity product (JHEQX).
The vol flow/delta hedge/$JHEQX experts are permabulls in cheap tuxedos. Change my mind
Combined with the flows incoming from the JPM $JHEQX trade, I wouldn't be surprised if we kiss $1200 by Friday.
If the JHEQX roll action that happens later this week doesn't break that call wall at 4800, the S&P is effectively done for this week. (The 411 there on that roll action is at least 8 billion futures contracts apparently has to be bought on Friday to roll the hedge to the next quarter)
Most major bullshit is done for December that I can think of. FOMC and OPEX being the major events. You have the JHEQX seagull and all that OI associated with it expiring end of this week which I can't get a clear answer if it's bullish or bearish. While I don't know what to make of the low volume (we're jacking because no one is around to sell??), I'm optimistic going towards EOW. That could be the hopium talking for my FDs though.
I'm aware of charm, but never really look at it like other 2nd order greeks. Guess I should start factoring them in. > So these sorts of positions can create an overhang on the market for the reason i mentioned. Just to be clear, when you say overhang, you're talking about some selling pressure that creates a drag on the SPY trying to go to ATH? > Also where did it say JPM is the one that initiated this position? Id be curious to read that thx If you look at the Twitter thread I linked, towards the beginning where he says "Once upon a time, there was a certain bank that shall remain unnamed", he has a link to the building with the logo on it. I think the exact fund name that this trade is done for is JHEQX. It's not exactly a secret anymore though.
To answer your last question. I believe this is ticker symbol JHEQX.
looks more or less out of steam here, low volume and some JHEQX/EOY flows could support or drive us a little higher through Dec 31 but pretty sure Jan 3 or 4 we see some good downside just like last year
JHEQX Seriously. About as safe as you can get.
The thing that’s funny is that the S&P really needs to go below 4500 (and really 4450) for the possibility for there to be real trouble into year end, given what happened the last time when the JHEQX strike was a factor because it fell below the strike price (which wasn’t pretty), but despite me knowing that it’s hard for me to not be irritated with what happened on Thursday last week. Wouldn’t have mattered if the red was spread out on that day, the fact that from futures to EOD, it went from setting a record to dropping as much as 100 points from that point, that stinks. Had it fallen below quickly enough, I think the story would’ve been the same as what September/October turned out to be, earnings season in January would have needed to come to the rescue. And that may still need to be the case.
That's not what liquidity refers to....it's about liquidity provided by market makers AKA bid/ask spread....in high volatility environments, MM pull back on liquidity to decrease their exposure which obviously leads to cascading downside and upside....and why do we have high vol to begin is because funds who were up for the year, are pulling out to lock in their performance scores + with 10 days left in the year, it makes sense for these funds to engage in tax-loss harvesting and lock in their capital gains accordingly Now, does it mean, it's red till January? not necessarily as there's still the gigantic JHEQX roll to play out which is dependent on where SPX will be when the roll happens. Why am I writing all this? coffee
I only partially read this, but to my understanding, this would be similar to October earlier this year, no? People got very bearish and hedged themselves up to their eyeballs, and then nothing happened, so OPEX week led to the market turning around because MMs unwound their positions by buying stock (the funny thing about that week was that I was so frustrated on that Monday, and then a few days later the S&P had its best day since March). There is one problem here though, and it's that JHEQX strike posed a problem until it was rolled in September this year, and it won't be rolled until the end of the month. 4450 probably needs to hold in the S&P, or it may be turn out the lights until 2022.