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Free Writing
Prospectus
Filed Pursuant to
Rule 433
Registration
Statement No. 333-155535
Dated November 4,
2009
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J.P.MORGAN
J.P. Morgan Optimax Market-Neutral Index
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Performance Update - November 2009
OVERVIEW
The J.P. Morgan Optimax Market-Neutral Index (the "Index") is a J.P. Morgan
strategy that seeks to generate returns through the dynamic selection of up to
18 commodities (the "Basket Constituents") based on a modern portfolio theory
approach to portfolio allocation.
Hypothetical and Actual Historical Performance - January 4, 1991 to October 30,
2009 (1)
[GRAPHIC OMITTED]
Key Features of the Index
o Dynamic long-short exposure to a portfolio of commodities that is
rebalanced monthly based on a rules-based methodology with a target
annualized volatility of 5% or less;
o Algorithmic portfolio construction intended to utilize momentum across
commodities to inform market-neutral portfolio allocation;
o Provides an alternative approach to investing in commodities through a
long-short strategy intended to produce absolute returns;
o Levels published on Bloomberg under the ticker CMDTOMER.
Hypothetical and Actual Realized Volatility - April 4, 1995 to October 30, 2009
[GRAPHIC OMITTED]
Recent Index Composition ("Basket Constituents")(3)
October 2009 November 2009
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Brent Crude 6.6% 5.9%
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WTI Crude -0.4% -6.1%
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Gas Oil -5.8% -6.0%
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Gasoline -2.6% 3.6%
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Heating Oil -6.6% -6.1%
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Natural Gas -0.7% -2.1%
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Silver 2.6% 2.7%
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Gold 6.6% 1.4%
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Zinc 2.3% 6.1%
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Nickel 2.8% 3.5%
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Lead 0.0% -1.2%
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Copper 0.0% 0.0%
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Aluminum -3.3% -6.1%
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Soybean 3.2% 5.4%
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Wheat -6.4% -2.5%
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Coffee 0.6% 0.0%
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Sugar 2.3% 1.8%
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Corn -1.2% -0.5%
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Recent Index Performance
Aug 2009 Sep 2009 Oct 2009
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Historical Return(1) 2.42% 1.11% -1.80%
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November 4, 2009
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Comparative Performance (%), Annualized Volatilities (%), Correlations, and
Sharpe Ratio
Year to Five Year Ten Year Ten Year
Date Annualized Annualized Annualized Sharpe
Performance(1) Performance(1) Performance(1) Volatility(2) Correlation(4) Ratio(4)
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Optimax Market- -1.36% 3.38% 5.35% 5.72% 1.00 0.94
Neutral Index
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S&P GSCI Excess
Return Index 10.66% -9.08% 2.67% 26.14% 0.17 0.10
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Notes
1 Represents the performance of the Index based on, as applicable to the
relevant measurement period, the hypothetical backtested weekly Index closing
levels from January 4, 1991 through May 2, 2008, and the actual historical
performance of the Index based on the weekly Index closing level from May 6,
2008 through October 30, 2009, as well as the performance of the S&P GSCI Excess
Return Index ("S&P GSCI") over the same period. For purposes of these examples,
each index was set equal to 100 at the beginning of the relevant measurement
period. There is no guarantee that Optimax will outperform the S&P GSCI or any
alternative strategy. Source: Bloomberg and JPMorgan.
2 Calculated from the historical returns, as applicable to the relevant
measurement period, of the indices using historical rolling weekly returns. For
any given day, represents the annualized volatility of each index's arithmetic
weekly returns for the 60-index day period preceding that day. The back-tested,
hypothetical, historical annualized volatility has inherent limitations. These
volatility results were achieved by means of a retroactive application of a
back-tested volatility model designed with the benefit of hindsight. No
representation is made that in the future the Index and the S&P GSCI will have
the volatilities as shown above or that the Index will outperform any
alternative investment strategy. Alternative modeling techniques or assumptions
might produce significantly different results and may prove to be more
appropriate. Actual annualized volatilities may vary materially from this
analysis. Source: Bloomberg and JPMorgan.
3 On a monthly basis, J.P. Morgan Securities Ltd., or JPMSL, acting as the Index
calculation agent, will rebalance the Index to take synthetic long and short
positions in the Basket Constituents based on mathematical rules that govern the
Index and track the returns of the synthetic portfolio above cash. The weights
for each Basket Constituent will be adjusted to comply with certain allocation
constraints, including constraints on individual Basket Constituents, as well as
the individual sectors. The sum of the weights is zero.
4 Volatility and correlation are based on daily returns over the past ten years.
Correlation refers to the degree the applicable index has changed relative to
changes in the JPMorgan Optimax Market-Neutral Index. The Sharpe Ratio, which is
a measure of risk-adjusted performance, is calculated as the annualized ten year
return divided by the annualized ten year volatility.
Key Risks
o There are risks associated with a momentum-based investment strategy. The
Index may fail to realize gains that could occur from holding assets that
have experienced price declines, but experience a sudden price spike
thereafter.
o The Index may not be successful, may not outperform any alternative
strategy related to the Basket Constituents, or may not achieve its target
volatility of 5%.
o The investment strategy involves monthly rebalancing and maximum weighting
caps applied to the Basket Constituents by sector and asset type. Changes
in the value of the Basket Constituents may offset each other.
o The Index was established on May 6, 2008 and has a limited operating
history
o The Index may perform poorly in non-trending `choppy' markets characterized
by short-term volatility. The reported level of the Index will include the
deduction of a fee assessed at 0.96% per annum.
o The momentum strategy embedded in the Index may not outperform other
strategies that do not rebalance monthly.
o The Index is not representative of a pure long-only commodities allocation
and is not designed to replicate commodities markets. Commodities futures
contracts are subject to uncertain legal and regulatory regimes that may
adversely affect the timing and amount of your payment at maturity.
o Commodities prices may change unpredictably, affecting the Index in
unforeseeable ways.
o If a negative weighting is assigned to a Basket Constituent, signifying a
short position relative to such constituent, there is an unlimited loss
exposure to such constituent and such exposure may result in a significant
drop in the level of the Index.
o Our affiliate, JPMSL, is the Calculation Agent and may adjust the Index in
a way that affects its level. JPMSL is under no obligation to consider your
interest as an investor in securities linked to the Index.
Index Disclaimers
The Optimax Market-Neutral Index is not sponsored, endorsed, sold or promoted by
Standard & Poor's, a division of the McGraw-Hill Companies, Inc. Standard &
Poor's makes no representation or warranty, express or implied, of the ability
of the Standard & Poor's Goldman Sachs Commodity Index Excess Return (the "S&P
GSCITM") or any component sub-index to track general commodity market
performance or any segment thereof respectively. Standard & Poor's' only
relationship to JPMorgan (in such capacity, the "Licensee") is the licensing of
the S&P GSCITM and any component sub-indices, all of which are determined,
composed and calculated by Standard & Poor's without regard to the Licensee or
the Index. Standard & Poor's has no obligation to take the needs of the Licensee
or the Index into consideration in determining, composing or calculating the S&P
GSCITM or any component sub-index. The S&P GSCITM and the component sub-indices
thereof are not owned, endorsed, or approved by or associated with Goldman Sachs
& Co. or its affiliated companies.
For more information on the Index and for additional key risk information see
Page 12 the Strategy Guide at
http://www.sec.gov/Archives/edgar/data/19617/000095010309002501/ optimax.pdf
The risks identified to the left are not exhaustive. You should also review
carefully the related "Risk Factors" section in the relevant product supplement
and the "Selected Risk Considerations" in the relevant term sheet or pricing
supplement.
DISCLAIMER
JPMorgan Chase & Co. ("J.P. Morgan") has filed a registration statement
(including a prospectus) with the Securities and Exchange Commission (the "SEC")
for any offerings to which these materials relate. Before you invest in any
offering of securities by J.P. Morgan, you should read the prospectus in that
registration statement, the prospectus supplement, as well as the particular
product supplement, the relevant term sheet or pricing supplement, and any other
documents that J.P. Morgan will file with the SEC relating to such offering for
more complete information about J.P. Morgan and the offering of any securities.
You may get these documents without cost by visiting EDGAR on the SEC Website at
www.sec.gov. Alternatively, J.P. Morgan, any agent, or any dealer participating
in the particular offering will arrange to send you the prospectus and the
prospectus supplement, as well as any product supplement and term sheet or
pricing supplement, if you so request by calling toll-free (866) 535-9248.
Free Writing Prospectus filed pursuant to Rule 433; Registration Statement No
333-155535
J.P. Morgan Structured Investments | 800 576 3529 |
JPM_Structured_Investments@jpmorgan.com
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