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Free
Writing Prospectus
Filed
Pursuant to Rule 433
Registration
Statement No. 333-155535
Dated
January 13, 2010
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J.P. Morgan Optimax Market-Neutral Index
Performance Update - January 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 December 31, 2009(1)
275 Optimax MN Index
250
225 S&P GSCI ER Index
200
175
150
125
100
75
50
25
0
-91 -93 -95 -97 -99 -01 -03 -05 -07 -09
Jan JanJan Jan Jan Jan Jan Feb Feb Feb
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 December 31, 2009(2)
60.00% Optimax MN Index S&P GSCI ER Index - Target Volatility
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Apr-04 Oct-03 Mar-03 Sep-02 Mar-02 Aug-01
Recent Index Composition ("Basket
Constituents")(3)
December 2009 January 2010
- ----------------------------------------------------------------
Brent Crude 6.7% 2.1%
- ----------------------------------------------------------------
WTI Crude -6.7% -6.1%
- ----------------------------------------------------------------
Gas Oil -6.4% -4.2%
- ----------------------------------------------------------------
Gasoline 6.7% 6.1%
- ----------------------------------------------------------------
Heating Oil -6.7% 4.3%
- ----------------------------------------------------------------
Natural Gas -2.9% -3.2%
- ----------------------------------------------------------------
Silver 4.1% 1.4%
- ----------------------------------------------------------------
Gold 0.6% 0.0%
- ----------------------------------------------------------------
Zinc 2.3% 0.0%
- ----------------------------------------------------------------
Nickel 1.7% -0.4%
- ----------------------------------------------------------------
Lead 1.0% 6.1%
- ----------------------------------------------------------------
Copper 6.7% 6.1%
- ----------------------------------------------------------------
Aluminum -6.7% -6.1%
- ----------------------------------------------------------------
Soybean 4.1% 3.2%
- ----------------------------------------------------------------
Wheat -3.2% -6.1%
- ----------------------------------------------------------------
Coffee 0.2% 0.7%
- ----------------------------------------------------------------
Sugar 0.5% 3.4%
- ----------------------------------------------------------------
Corn 0.0% 1.4%
- ----------------------------------------------------------------
Recent Index Performance
Oct 2009 Nov 2009 Dec 2009
- ----------------------------------------------------------------
Historical Return(1) -1.80% 0.62% -0.38%
- ----------------------------------------------------------------
January 13, 2010
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Comparative Performance (%), Annualized Volatilities (%), Correlations, and Sharpe Ratio
Year to Five Year Annualized Ten Year Ten Year Correlation(4) Sharpe
Date Performance(1) Performance(1) Annualized Performance(1) Annualized Volatility(2) Ratio(4)
-------------------------------------------------------------------------------------------------------------------------------
Optimax Market-
Neutral Index -1.12% 3.35% 4.95% 5.69% 1.00 0.87
-------------------------------------------------------------------------------------------------------------------------------
S&P GSCI Excess
Return Index 13.30% -5.71% 2.18% 26.16% 0.17 0.08
-------------------------------------------------------------------------------------------------------------------------------
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 December 31, 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 st rategy. 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.
o 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.
o 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.
o 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
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� 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� or any component sub-index. The S&P GSCI� 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 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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