Free Writing Prospectus
Filed Pursuant to Rule 433
Registration Statement No. 333-199966
Dated July 21, 2015
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FOR RIA/BROKER-DEALER USE ONLY
J. P. Morgan US Long Equity Dynamic Overlay 80 Index (Series 1)
OVERVIEW
The J.P. Morgan US Long Equity Dynamic Overlay 80 Index (Series 1) (the "Index"
or " US LEDO") is a rules-based Index designed to provide a synthetic long
position in the total return version of the SandP 500([R]) Index (the "Equity
Index") and limited downside protection against adverse movements of the Equity
Index through a synthetic collar strategy as an overlay to the synthetic long
position in the total return version of the Equity Index, subject to fees and
deductions.
Index Features
[] The Index consists of three positions:
[] a synthetic long position in the SandP 500([R]) Total Return Index; [] a
synthetic rolling collar strategy* applied to the "price return" version of the
Equity Index (the "Price Return Equity Index"), consisting of (a) a monthly
rolled synthetic short call position of 1-month maturity with target strike
prices varying from 103% to 108% of the closing levels of the Price Return
Equity Index and (b) quarterly rolled synthetic long put positions of 11-month
maturity with a target strike price of 80% of the closing levels of the Price
Return Equity Index; and [] a synthetic delta hedge position* with respect to
the synthetic short call position consisting of a variable synthetic exposure
to futures contracts referencing the Price Return Equity Index.
*In limited circumstances the Index may not implement these synthetic
positions.
Short Call Leg
[] The short call leg consists of: the synthetic short call position and the
synthetic delta hedge position described above.
[] The target call strike price of each monthly rolled synthetic call position
varies from 103% to 108% of the closing levels of the Price Return Equity Index
based on the level of the CBOE Volatility Index ("VIX").
[] The delta hedge mechanism attempts to mitigate the risk that the Price
Return Equity Index may appreciate to levels above the strike price of the call
option.
[] The delta hedge mechanism is activated when the closing level of the VIX is
below its six month or five year moving average.
[] The delta hedge mechanism activation is gradual: activated when VIX is below
100% of either of the two moving averages and fully implemented once VIX is 80%
of either of the two moving averages.
Volatility Index Level (VIX) Call Strike
VIX (/= 20 103.00%
20 ( VIX (/= 25 104.00%
25 ( VIX (/= 30 105.00%
30 ( VIX (/= 35 106.00%
35 ( VIX (/= 60 107.00%
60 ( VIX 108.00%
Hypothetical historical performance comparison: US LEDO and SandP
500([R]) Total Return Index: Jan 2002 -- June 2015
GRAPHIC OMMITTED
Source: J.P. Morgan. As of 6/30/2015. PAST PERFORMANCE AND BACK-TESTED
PERFOMANCE ARE NOT INDICATIVE OF FUTURE RESULTS. The Index was launched on
9/17/2013; therefore any data shown for the Index prior to that date is
back-tested. The information in this chart is provided solely for reference. No
guarantee can be given that the Index will outperform the SandP 500([R]) Total
Return Index or will not under perform the SandP 500([R]) Total Return Index in
the future.
Hypothetical historical returns and volatilities: US LEDO Index and SandP
500([R]) Total Return Index: Jan 2002 -- June 2015
SPTR JPUSLEDO
Annualized Return 6.51% 6.82%
Volatility 19.90% 14.28%
Sharpe Ratio 0.33 0.48
Max Drawdown -55.25% -38.79%
Source: J.P. Morgan. As of 6/30/2015. PAST PERFORMANCE AND BACK-TESTED
PERFOMANCE ARE NOT INDICATIVE OF FUTURE RESULTS. The Index was
launched on 9/17/2013; therefore any data shown for that index prior to that date is
back-tested. The information in this chart is provided solely for reference. No guarantee
can be given that the Index will outperform the SandP 500([R]) Total Return Index or will not
under perform the SandP 500([R]) Total Return Index in the future.
Long Put Leg
[] The long put leg combines three* synthetic long put positions
of 11-month maturity with a target strike price of 80% of the
closing levels of the Price Return Equity Index.
[] The Index is designed to initiate each synthetic long put
position on a quarterly basis, subject to certain conditions.
[] The put options are rolled into new contracts 2 months before
their expiry. Rolling the put options shortly before their
expiration mitigates the negative carry resulting from the
significant decrease in value that typically happens during the
last 2 months of a long-dated option such as the put options
referenced by the Index.
*In limited circumstances there my be less than three synthetic put positions.
Cutting the Tail Risk
The following chart shows the performance of the SandP 500([R]) Total
Return Index and the hypothetical performance of U.S. LEDO
during the worst 10 performance months of the SandP 500([R])
Total Return Index since 2002:
SandP 500([R]) Total
US LEDO Difference Month
Return Index
-16.79% -6.94% 9.86% Oct-08
-10.87% -6.32% 4.55% Sep-02
-10.65% -6.14% 4.51% Feb-09
-8.91% -5.15% 3.76% Sep-08
-8.43% -8.06% 0.37% Jun-08
-8.43% -3.98% 4.45% Jan-09
-7.99% -6.17% 1.81% May-10
-7.80% -2.94% 4.85% Jul-02
-7.18% -8.02% -0.85% Nov-08
-7.12% -5.38% 1.74% Jun-02
Source: J.P. Morgan. As of 6/30/2015. PAST PERFORMANCE AND BACK-TESTED
PERFOMANCE ARE NOT INDICATIVE OF FUTURE RESULTS. The Index was launched on
9/17/2013; therefore any data shown for the Index prior to that date is
back-tested. The information in this chart is provided solely for reference. No
guarantee can be given that the Index will outperform the SandP 500([R]) Total
Return Index or will not under perform the SandP 500([R]) Total Return Index in
the future.
J.P. Morgan Structured Investments | 800 576 3529 |
JPM_Structured_Investments@jpmorgan.com July 1, 2015
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Hypothetical Illustration of the Delta Hedging of the Short Call Position of
the Index (January 2002 -- June 2015)
GRAPHIC OMMITTED
Source: J.P. Morgan. As of 6/30/2015. 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. 333-199966
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 July 1, 2015
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