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Free
Writing Prospectus
Filed Pursuant to Rule 433
Registration Statement No. 333-155535
Dated March 3, 2010
Filed Pursuant to Rule 433
Registration Statement No. 333-155535
Dated March 3, 2010
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J.P. Morgan Optimax Market-Neutral Index
Performance Update March 2010
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 February 26, 2010
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 February 26, 2010
[GRAPHIC OMITTED]
Recent Index Composition (Basket Constituents)(3)
February 2010 March 2010
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Brent Crude 7.7% 1.0%
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WTI Crude -7.7% 5.5%
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Gas Oil -3.8% -3.2%
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Gasoline 7.7% 5.5%
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Heating Oil 4.3% -2.7%
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Natural Gas -2.5% -2.0%
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Silver 2.8% -5.5%
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Gold -4.2% -5.5%
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Zinc 1.1% -1.8%
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Nickel -1.7% 0.0%
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Lead 3.7% 3.1%
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Copper 7.7% 5.5%
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Aluminum -0.1% -0.1%
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Soybean 2.4% 5.3%
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Wheat -7.7% -4.5%
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Coffee -1.4% 0.0%
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Sugar 5.4% 1.6%
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Corn -0.8% -2.1%
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Recent Index Performance
Dec 2009 Jan 2010 Feb 2010
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Historical Return -0.38% -0.13% -1.33%
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March 3, 2010
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Comparative Performance (%), Annualized Volatilities (%), Correlations, and
Sharpe Ratio
Year to Five Year Annualized Ten Year Ten Year Sharpe
Date Performance(1) Performance(1) Annualized Performance(1) Annualized Volatility(2) Correlation(4) Ratio(4)
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Optimax Market- -1.46% 3.32% 4.43% 5.70% 1.00 0.78
Neutral Index
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S&P GSCI Excess -2.79% -8.50% 0.66% 26.19% 0.17 0.03
Return Index
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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 February 26, 2010, as well as the performance of
the S&P GSCI(tm) Excess Return Index ("S&P GSCI(tm)") 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(tm) 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(tm) 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
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.
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%.
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.
The Index was established on May 6, 2008 and has a limited operating history
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.
The momentum strategy embedded in the Index may not outperform other strategies
that do not rebalance monthly.
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.
Commodities prices may change unpredictably, affecting the Index in
unforeseeable ways.
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.
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
GSCI(tm)") 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 GSCI(tm) and any component sub-in dices, 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
GSCI(tm) or any component sub-index. The S&P GSCI(tm) 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/19617/000095010310000062/j pm_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 re gistration statement
(including a prospectus) with the Securities and Exchange Commission (the "SEC")
for any offerings to which these materials r elate. 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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