NOTES OF J.P.MORGAN (JPM)
Covered Call

1. By June of 2003, JPM had traded up from a lower trading range
in the $25.00 area to a new range around $35.00.

2. Since entering the new trading range in June, the stock has
consolidated into a relatively flat, horizontal trading channel.
For the most part, this channel is only around $3.00 to $4.00
wide.

3. This trading channel is not only tight, but it seems to be
equally dispersed around the $35.00 mark. The stock does not
seem to venture very far on either side of $35.00.

4. From the time that the stock enters the trading channel, the
range of the channel has been decreasing or tightening, which
indicates decreasing volatility.

Conclusion: JPM sets up a classic text book buy-write
opportunity above. After finding a new trading range, the stock
consolidates into a tight, trading channel that is almost
horizontal. Further, this channel tightens and does not deviate
from $35.00 to the point where it even comes close to a channel
line violation.

Here, an investor would most likely be interested in writing the
35 strike price calls to collect premium as the stock trades
sideways. Obviously, there is no way to predict how long a stock
will consolidate like this, but the risks are low, and in this
case the covered call strategy would have returned some very
nice, low risk returns over this period.