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Source: J.P. Morgan. As of 3/31/2014. PAST PERFORMANCE AND BACK-TESTED
PERFORMANCE ARE NOT INDICATIVE OF FUTURE LEVELS. The Index was launched on
9/17/2013; therefore any data used for the Index prior to that date is
back-tested.
Index fee and cost associated with trading the puts and calls, and the delta
hedging mechanism (a) Daily index fee: on each day, the calculation of the Index
reflects the deduction of an adjustment factor of 0.75% per annum (the "Daily
Index Fee"); (b) Call deduction and put deduction: on a monthly or quarterly
basis, as applicable, when the Index's synthetic short call or long put
exposure, as applicable, is rolled into a new SPX option contract, a call
deduction or put deduction, as applicable, is subtracted in the calculation of
the Index. The call deduction or put deduction is calculated by multiplying the
applicable volatility spread (which is between 0.30% and 3.00%) by the vega of
the applicable option contract, subject to certain minimum and maximum amounts.
The applicable volatility spread depends on the level of the CBOE Volatility
Index ("VIX") on the relevant date of determination. Unlike the Daily Index Fee,
the call deduction and the put deduction are not per annum deductions; and (c)
Delta deduction: on each day the delta hedge is implemented, 0.03% of any
increase or decrease in the Index's exposure to the futures contracts on the
Price Return Equity Index is deducted in the calculation of the Index. The delta
deduction reflects costs relating to adjustments to the Index's delta hedge of
its synthetic short call position. Unlike the Daily Index Fee, the delta
deduction is not a per annum percentage deduction. Glossary of Select Terms
"Call" An option contract that gives the buyer of the option the right, but not
the obligation, to buy an underlying asset at a specified price (strike) within
a specified timeframe. "Put" An option contract that gives the buyer of the
option the right, but not the obligation, to sell a specified underlying asset
at a specified price (strike) within a specified timeframe. "Collar" Combination
of the purchase of a put option and the sale of a call option on the same
underlying asset. "Volatility" A way to measure the risk associated with an
asset, by measuring the variability of its returns. It is usually expressed as a
percentage. "Vega" A measurement of an option's sensitivity to changes in the
volatility of the underlying asset of that option. "Delta hedge" a hedge of a
position in a derivative financial instrument through an offsetting position in
that derivative instrument's underlying asset (or vice versa). "Annualized
return" The return of an underlying asset over a period of time, expressed as a
time-weighted annual percentage. "Sharpe Ratio" The ratio of an asset's rate of
return over its volatility, used to measure risk-adjusted performance. "Maximum
drawdown" The maximum decline experienced by an asset during a given period of
time, from peak to trough.
What are the main risks in the Index?
[] Any securities we may issue linked to the Index may result in a loss, and
are exposed to the credit risk of J.P. Morgan Chase and Co.
[] The Index has limited operating history.
[] The reported level of the Index incorporates the daily deduction of an
index fee, the cost associated with trading the puts and the calls, and
delta hedging the short call position.
[] The Index provides exposure to equity options and futures, which are
subject to significant fluctuations, and are not suitable for all
investors.
[] There are risks associated with the delta hedging.
[] There are risks associated with synthetic options.
[] The Index references a synthetic portfolio of underlying assets. [] The
Index may not be successful and may not outperform any alternative
strategy.
[] The cost of synthetically trading the options and futures constituents may
negatively impact performance.
[] Even with delta hedging, the Index may still underperform the underlying
equity Index.
[] Even though the Index maintains a long put position, the level of the Index
may not increase when the market decreases.
[] The Index is an excess return index, thought it tracks a total return
index.
[] Our affiliate, J.P. Morgan Securities plc. ("JPMSL"), is the sponsor and
calculation agent for the Index and may adjust the Index in a way that
affects its level.
These risk factors are not exhaustive. Please review the relevant underlying
supplement, product supplement we have filed and any relevant term sheet or
pricing supplement for further information on risk factors associated with the
J.P. Morgan U.S.
Long Equity Dynamic Overlay 80 Index (Series 1).
Disclaimer
SEC Legend: JPMorgan Chase and Co. has filed a registration statement (including
a prospectus) with the SEC for any offerings to which these materials relate.
Before you invest, you should read the prospectus in that registration statement
and the other documents relating to this offering that JPMorgan Chase and Co.
has filed with the SEC for more complete information about JPMorgan Chase and
Co. and this offering. You may get these documents without cost by visiting
EDGAR on the SEC Web site at www.sec.gov. Alternatively, JPMorgan Chase and Co.,
any agent or any dealer participating in this offering will arrange to send you
the prospectus and each prospectus supplement as well as any product supplement,
underlying supplement, pricing supplement and term sheet if you so request by
calling toll-free 800-576-3529.
Free Writing Prospectus Filed Pursuant to Rule 433 Registration Statement No.
333-177923 To the extent there are any inconsistencies between this free writing
prospectus and the relevant pricing supplement, the relevant pricing supplement,
including any hyperlinked information, shall supersede this free writing
prospectus.
Investment suitability must be determined individually for each investor. The
financial instruments described herein may not be suitable for all investors.
This information is not intended to provide and should not be relied upon as
providing accounting, legal, regulatory or tax advice. Investors should consult
their own advisors on these matters.
IRS Circular 230 Disclosure: JPMorgan Chase and Co. and its affiliates do not
provide tax advice. Accordingly, any discussion of U.S. tax matters contained
herein (including any attachments) is not intended or written to be used, and
cannot be used, in connection with the promotion, marketing or recommendation by
anyone unaffiliated with JPMorgan Chase and Co. of any of the matters addressed
herein or for the purpose of avoiding U.S. tax-related penalties.
J. P. Morgan Structured Investments | 800 576 3529 |
JPM_Structured_Investments@jpmorgan.com
April 2, 2014
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