The information in this preliminary pricing
supplement is not complete and may be changed. This preliminary pricing supplement is not an offer to sell nor does it seek an offer to
buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated July 25, 2024
July , 2024 |
Registration Statement Nos. 333-270004 and 333-270004-01; Rule 424(b)(2) |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg)
JPMorgan Chase Financial Company LLC
Structured Investments
Capped Dual Directional Buffered Equity Notes Linked
to the S&P 500® Futures Excess Return Index due July 29, 2025
Fully and Unconditionally Guaranteed by JPMorgan
Chase & Co.
| · | The notes are designed for investors who seek a capped, unleveraged exposure to any appreciation (with a Maximum Upside Return of
at least 12.00%), or a capped, unleveraged return equal to the absolute value of any depreciation (up to the Buffer Amount of 15.00%),
of the S&P 500® Futures Excess Return Index at maturity. |
| · | Investors should be willing to forgo interest payments and be willing to lose up to 85.00% of their principal amount at maturity. |
| · | The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan Financial,
the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co. Any payment on the notes is subject to the
credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as guarantor of the notes. |
| · | Minimum denominations of $1,000 and integral multiples thereof |
| · | The notes are expected to price on or about July 25, 2024 (the “Pricing Date”) and are expected to settle on or about
July 30, 2024. The Strike Value has been determined by reference to the closing level of the Index on July 24, 2024 and not
by reference to the closing level of the Index on the Pricing Date. |
Investing in the notes involves a number of risks. See
“Risk Factors” beginning on page S-2 of the accompanying prospectus supplement, Annex A to the accompanying prospectus addendum,
“Risk Factors” beginning on page PS-11 of the accompanying product supplement and “Selected Risk Considerations”
beginning on page PS-5 of this pricing supplement.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this pricing
supplement or the accompanying product supplement, underlying supplement, prospectus supplement, prospectus and prospectus addendum. Any
representation to the contrary is a criminal offense.
|
Price to Public (1) |
Fees and Commissions (2) |
Proceeds to Issuer |
Per note |
$1,000 |
$ |
$ |
Total |
$ |
$ |
$ |
(1) See “Supplemental Use of Proceeds”
in this pricing supplement for information about the components of the price to public of the notes.
(2) J.P. Morgan Securities LLC, which we refer to as
JPMS, acting as agent for JPMorgan Financial, will pay all of the selling commissions it receives from us to other affiliated or unaffiliated
dealers. In no event will these selling commissions exceed $2.00 per $1,000 principal amount note. See “Plan of Distribution (Conflicts
of Interest)” in the accompanying product supplement. |
If the notes priced today, the estimated value of the notes would
be approximately $989.00 per $1,000 principal amount note. The estimated value of the notes, when the terms of the notes are set, will
be provided in the pricing supplement and will not be less than $970.00 per $1,000 principal amount note. See “The Estimated Value
of the Notes” in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by the Federal Deposit
Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing supplement to product supplement no. 4-I dated April
13, 2023, underlying supplement no. 1-I dated April 13, 2023,
the prospectus and prospectus supplement, each dated April
13, 2023, and the prospectus addendum dated June 3, 2024
Key Terms
Issuer: JPMorgan
Chase Financial Company LLC, a direct, wholly owned finance subsidiary of JPMorgan Chase & Co.
Guarantor: JPMorgan
Chase & Co.
Index: The
S&P 500® Futures Excess Return Index (Bloomberg ticker: SPXFP)
Maximum Upside Return:
At least 12.00% (corresponding to a maximum payment at maturity if the Index Return
is positive of at least $1,120.00 per $1,000 principal amount note) (to be provided in the pricing supplement)
Buffer Amount: 15.00%
Strike Date: July
24, 2024
Pricing Date:
On or about July 25, 2024
Original Issue
Date (Settlement Date): On or about July 30, 2024
Observation
Date*: July 24, 2025
Maturity Date*:
July 29, 2025
* Subject to postponement
in the event of a market disruption event and as described under “General Terms of Notes — Postponement of a Determination
Date — Notes Linked to a Single Underlying — Notes Linked to a Single Underlying (Other Than a Commodity Index)” and
“General Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement
Payment at Maturity:
If the Final Value
is greater than the Strike Value, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000
+ ($1,000 × Index Return), subject to the Maximum Upside Return
If the Final Value
is equal to the Strike Value or is less than the Strike Value by up to the Buffer Amount, your payment at maturity per $1,000 principal
amount note will be calculated as follows:
$1,000
+ ($1,000 × Absolute Index Return)
This payout formula
results in an effective cap of 15.00% on your return at maturity if the Index Return is negative. Under these limited circumstances, your
maximum payment at maturity is $1,150.00 per $1,000 principal amount note.
If the Final Value
is less than the Strike Value by more than the Buffer Amount, your payment at maturity per $1,000 principal amount note will be calculated
as follows:
$1,000
+ [$1,000 × (Index Return + Buffer Amount)]
If the Final Value
is less than the Strike Value by more than the Buffer Amount, you will lose some or most of your principal amount at maturity.
Absolute Index
Return: The absolute value of the Index Return. For example, if the Index Return
is -5%, the Absolute Index Return will equal 5%.
Index Return:
(Final
Value – Strike Value)
Strike Value
Strike Value:
The closing level of the Index on the Strike Date, which was 468.73. The
Strike Value is not the closing level of the Index on the Pricing Date.
Final Value:
The closing level of the Index on the Observation Date
PS-1
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
Supplemental
Terms of the Notes
The notes are not futures contracts or swaps and
are not regulated under the Commodity Exchange Act of 1936, as amended (the “Commodity Exchange Act”). The notes are
offered pursuant to an exemption from regulation under the Commodity Exchange Act, commonly known as the hybrid instrument exemption,
that is available to securities that have one or more payments indexed to the value, level or rate of one or more commodities, as set
out in section 2(f) of that statute. Accordingly, you are not afforded any protection provided by the Commodity Exchange Act or any regulation
promulgated by the Commodity Futures Trading Commission.
For purposes of the accompanying product supplement,
the Index will be deemed to be an Equity Index, except as provided below, and any references in the accompanying product supplement to
the securities included in an Equity Index (or similar references) should be read to refer to the securities included in the S&P 500®
Index, which is the reference index for the futures contracts included in the Index. Notwithstanding the foregoing, the Index will be
deemed to be a Commodity Index for purposes of the section entitled “The Underlyings — Indices — Discontinuation of
an Index; Alteration of Method of Calculation” in the accompanying product supplement.
Notwithstanding anything to the contrary in the accompanying
product supplement, if a Determination Date (as defined in the accompanying product supplement) has been postponed to the applicable Final
Disrupted Determination Date (as defined in the accompanying product supplement) and that day is a Disrupted Day (as defined in the accompanying
product supplement), the calculation agent will determine the closing level of the Index for that Determination Date on that Final Disrupted
Determination Date in accordance with the formula for and method of calculating the closing level of the Index last in effect prior to
the commencement of the market disruption event (or prior to the non-trading day), using the official settlement price (or, if trading
in the relevant futures contract has been materially suspended or materially limited, the calculation agent’s good faith estimate
of the applicable settlement price that would have prevailed but for that suspension or limitation) at the close of the principal trading
session on that date of each futures contract most recently composing the Index, as well as any futures contract required to roll any
expiring futures contract in accordance with the method of calculating the Index.
Any values of the Index, and any values derived therefrom,
included in this pricing supplement may be corrected, in the event of manifest error or inconsistency, by amendment of this pricing supplement
and the corresponding terms of the notes. Notwithstanding anything to the contrary in the indenture governing the notes, that amendment
will become effective without consent of the holders of the notes or any other party.
PS-2
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
Hypothetical Payout Profile
The following table and graph illustrate the hypothetical
total return and payment at maturity on the notes linked to a hypothetical Index. The “total return” as used in this pricing
supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note
to $1,000. The hypothetical total returns and payments set forth below assume the following:
| · | a Strike Value of 100.00; |
| · | a Maximum Upside Return of 12.00%; and |
| · | a Buffer Amount of 15.00%. |
The hypothetical Strike Value of 100.00 has been chosen
for illustrative purposes only and does not represent the actual Strike Value. The actual Strike Value is the closing level of the Index
on the Strike Date and is specified under “Key Terms — Strike Value” in this pricing
supplement. For historical data regarding the actual closing levels of the Index, please see the historical information set forth
under “The Index” in this pricing supplement.
Each hypothetical total return or hypothetical payment
at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment at maturity applicable
to a purchaser of the notes. The numbers appearing in the following table and graph have been rounded for ease of analysis.
Final Value |
Index Return |
Absolute Index Return |
Total Return on the
Notes |
Payment at Maturity |
180.00 |
80.00% |
N/A |
12.00% |
$1,120.00 |
165.00 |
65.00% |
N/A |
12.00% |
$1,120.00 |
150.00 |
50.00% |
N/A |
12.00% |
$1,120.00 |
140.00 |
40.00% |
N/A |
12.00% |
$1,120.00 |
130.00 |
30.00% |
N/A |
12.00% |
$1,120.00 |
120.00 |
20.00% |
N/A |
12.00% |
$1,120.00 |
112.00 |
12.00 |
N/A |
12.00% |
$1,120.00 |
110.00 |
10.00% |
N/A |
10.00% |
$1,100.00 |
105.00 |
5.00% |
N/A |
5.00% |
$1,050.00 |
101.00 |
1.00% |
N/A |
1.00% |
$1,010.00 |
100.00 |
0.00% |
0.00% |
0.00% |
$1,000.00 |
95.00 |
-5.00% |
5.00% |
5.00% |
$1,050.00 |
90.00 |
-10.00% |
10.00% |
10.00% |
$1,100.00 |
85.00 |
-15.00% |
15.00% |
15.00% |
$1,150.00 |
80.00 |
-20.00% |
N/A |
-5.00% |
$950.00 |
70.00 |
-30.00% |
N/A |
-15.00% |
$850.00 |
60.00 |
-40.00% |
N/A |
-25.00% |
$750.00 |
50.00 |
-50.00% |
N/A |
-35.00% |
$650.00 |
40.00 |
-60.00% |
N/A |
-45.00% |
$550.00 |
30.00 |
-70.00% |
N/A |
-55.00% |
$450.00 |
20.00 |
-80.00% |
N/A |
-65.00% |
$350.00 |
10.00 |
-90.00% |
N/A |
-75.00% |
$250.00 |
0.00 |
-100.00% |
N/A |
-85.00% |
$150.00 |
PS-3
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
The following graph demonstrates the hypothetical total
returns and hypothetical payments at maturity on the notes for a range of Index Returns. There can be no assurance that the performance
of the Index will result in the return of any of your principal amount in excess of $150.00 per $1,000 principal amount note, subject
to the credit risks of JPMorgan Financial and JPMorgan Chase & Co.
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_002.jpg)
How the
Notes Work
Index Appreciation Upside Scenario:
If the Final Value is greater than the Strike Value,
investors will receive at maturity the $1,000 principal amount plus a return equal to the Index Return, subject to the Maximum
Upside Return of at least 12.00%. Assuming a hypothetical Maximum Upside Return of 12.00%, an investor will realize the maximum upside
payment at maturity at a Final Value of 112.00% or more of the Strike Value.
| · | If the closing level of the Index increases 5.00%, investors will receive at maturity a return equal
to 5.00%, or $1,050.00 per $1,000 principal amount note. |
| · | Assuming a hypothetical Maximum Upside Return of 12.00%, if the closing level of the Index increases
50.00%, investors will receive at maturity a return equal to the 12.00% Maximum Upside Return, or $1,120.00 per $1,000 principal amount
note, which is the maximum payment at maturity if the Index Return is positive. |
Index Par or Index Depreciation Upside Scenario:
If the Final Value
is equal to the Strike Value or is less than the Strike Value by up to the Buffer Amount of 15.00%, investors will receive at maturity
the $1,000 principal amount plus a return equal to the Absolute Index Return.
| · | For example, if the closing level of the Index declines 5.00%, investors will receive at maturity a return equal to 5.00%, or $1,050.00
per $1,000 principal amount note. |
Downside Scenario:
If the Final Value is less than the Strike Value by more
than the Buffer Amount of 15.00%, investors will lose 1% of the principal amount of their notes for every 1% that the Final Value is less
than the Strike Value by more than the Buffer Amount.
| · | For example, if the closing level of the Index declines 60.00%,
investors will lose 45.00% of their principal amount and receive only $550.00 per $1,000 principal amount note at maturity, calculated
as follows: |
$1,000
+ [$1,000 × (-60.00% + 15.00%)] = $550.00
The hypothetical returns and hypothetical payments on
the notes shown above apply only if you hold the notes for their entire term. These hypotheticals do not reflect the fees or expenses
that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical returns and
hypothetical payments shown above would likely be lower.
PS-4
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
Selected
Risk Considerations
An investment in the notes involves significant risks.
These risks are explained in more detail in the “Risk Factors” sections of the accompanying prospectus supplement and product
supplement and in Annex A to the accompanying prospectus addendum.
Risks Relating to the Notes Generally
| · | YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — |
The notes do not guarantee any return of principal.
If the Final Value is less than the Strike Value by more than 15.00%, you will lose 1% of the principal amount of your notes for every
1% that the Final Value is less than the Strike Value by more than 15.00%. Accordingly, under these circumstances, you will lose up to
85.00% of your principal amount at maturity.
| · | YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED TO THE MAXIMUM UPSIDE RETURN IF THE INDEX RETURN IS POSITIVE, |
regardless of the appreciation of the Index,
which may be significant.
| · | YOUR MAXIMUM GAIN ON THE NOTES IS LIMITED BY THE BUFFER AMOUNT IF THE INDEX RETURN IS
NEGATIVE — |
Because the payment at maturity will not reflect
the Absolute Index Return if the Final Value is less than the Strike Value by more than the Buffer Amount, the Buffer Amount is effectively
a cap on your return at maturity if the Index Return is negative. The maximum payment at maturity if the Index Return is negative is $1,150.00
per $1,000 principal amount note.
| · | CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. — |
Investors are dependent on our and JPMorgan
Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan Chase & Co.’s
creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely to adversely affect the value of
the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you may not receive any amounts owed to you
under the notes and you could lose your entire investment.
| · | AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED
ASSETS — |
As a finance subsidiary of JPMorgan Chase
& Co., we have no independent operations beyond the issuance and administration of our securities and the collection of intercompany
obligations. Aside from the initial capital contribution from JPMorgan Chase & Co., substantially all of our assets relate to obligations
of JPMorgan Chase & Co. to make payments under loans made by us to JPMorgan Chase & Co. or under other intercompany agreements.
As a result, we are dependent upon payments from JPMorgan Chase & Co. to meet our obligations under the notes. We are not a key operating
subsidiary of JPMorgan Chase & Co. and in a bankruptcy or resolution of JPMorgan Chase & Co. we are not expected to have sufficient
resources to meet our obligations in respect of the notes as they come due. If JPMorgan Chase & Co. does not make payments to us and
we are unable to make payments on the notes, you may have to seek payment under the related guarantee by JPMorgan Chase & Co., and
that guarantee will rank pari passu with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co. For more
information, see the accompanying prospectus addendum.
| · | THE NOTES DO NOT PAY INTEREST. |
| · | YOU WILL NOT HAVE ANY RIGHTS WITH RESPECT TO THE E-MINI® S&P 500®
FUTURES CONTRACTS (THE “UNDERLYING FUTURES CONTRACTS”) OR THE SECURITIES INCLUDED IN THE INDEX UNDERLYING THE UNDERLYING FUTURES
CONTRACTS. |
The notes will not be listed on any securities
exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which JPMS
is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term trading instruments.
Accordingly, you should be able and willing to hold your notes to maturity.
| · | THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT
— |
You should consider your potential investment
in the notes based on the minimums for the estimated value of the notes and the Maximum Upside Return.
PS-5
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
Risks Relating to Conflicts of Interest
We and our affiliates play a variety of roles
in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests are potentially
adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours or our affiliates in
connection with the notes could result in substantial returns for us or our affiliates while the value of the notes declines. Please refer
to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement.
Risks Relating to the Estimated Value and Secondary
Market Prices of the Notes
| · | THE ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO
PUBLIC) OF THE NOTES — |
The estimated value of the notes is only an
estimate determined by reference to several factors. The original issue price of the notes will exceed the estimated value of the notes
because costs associated with selling, structuring and hedging the notes are included in the original issue price of the notes. These
costs include the selling commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent
in hedging our obligations under the notes and the estimated cost of hedging our obligations under the notes. See “The Estimated
Value of the Notes” in this pricing supplement.
| · | THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY
DIFFER FROM OTHERS’ ESTIMATES — |
See “The Estimated Value of the Notes”
in this pricing supplement.
| · | THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE
— |
The internal funding rate used in the determination
of the estimated value of the notes may differ from the market-implied funding rate for vanilla fixed income instruments of a similar
maturity issued by JPMorgan Chase & Co. or its affiliates. Any difference may be based on, among other things, our and our affiliates’
view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes
in comparison to those costs for the conventional fixed income instruments of JPMorgan Chase & Co. This internal funding rate is based
on certain market inputs and assumptions, which may prove to be incorrect, and is intended to approximate the prevailing market replacement
funding rate for the notes. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the
terms of the notes and any secondary market prices of the notes. See “The Estimated Value of the Notes” in this pricing supplement.
| · | THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT
STATEMENTS) MAY BE HIGHER THAN THE THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD — |
We generally expect that some of the costs
included in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes
by JPMS in an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices of the Notes”
in this pricing supplement for additional information relating to this initial period. Accordingly, the estimated value of your notes
during this initial period may be lower than the value of the notes as published by JPMS (and which may be shown on your customer account
statements).
| · | SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE
OF THE NOTES — |
Any secondary market prices of the notes will
likely be lower than the original issue price of the notes because, among other things, secondary market prices take into account our
internal secondary market funding rates for structured debt issuances and, also, because secondary market prices may exclude selling commissions,
projected hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a result,
the price, if any, at which JPMS will be willing to buy the notes from you in secondary market transactions, if at all, is likely to be
lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss to you.
| · | SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS
— |
The secondary market price of the notes during
their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the
selling commissions, projected hedging profits, if any, estimated hedging costs and the level of the Index. Additionally, independent
pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on customer account statements.
This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to purchase your notes
in the secondary market. See “Risk Factors —
PS-6
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
Risks Relating to the Estimated Value and
Secondary Market Prices of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors”
in the accompanying product supplement.
Risks Relating to the Index
| · | JPMORGAN CHASE & CO. IS CURRENTLY ONE OF THE COMPANIES THAT MAKE UP THE S&P 500®
INDEX, THE INDEX UNDERLYING THE UNDERLYING FUTURES CONTRACTS OF THE INDEX, |
but
JPMorgan Chase & Co. will not have any obligation to consider your interests in taking any corporate action that might affect the
level of the Index.
| · | THE INDEX IS SUBJECT TO SIGNIFICANT RISKS ASSOCIATED WITH THE UNDERLYING FUTURES CONTRACTS
— |
The Index
tracks the excess return of the Underlying Futures Contracts. The price of an Underlying Futures Contract depends not only on the level
of the underlying index referenced by the Underlying Futures Contract, but also on a range of other factors, including but not limited
to the performance and volatility of the U.S. stock market, corporate earnings reports, geopolitical events, governmental and regulatory
policies and the policies of the Chicago Mercantile Exchange (the “Exchange”) on which the Underlying Futures Contracts trade.
In addition, the futures markets are subject to temporary distortions or other disruptions due to various factors, including the lack
of liquidity in the markets, the participation of speculators and government regulation and intervention. These factors and others can
cause the prices of the Underlying Futures Contracts to be volatile and could adversely affect the level of the Index and any payments
on, and the value of, your notes.
| · | SUSPENSION OR DISRUPTIONS OF MARKET TRADING IN THE UNDERLYING FUTURES CONTRACTS MAY ADVERSELY
AFFECT THE VALUE OF YOUR NOTES — |
Futures
markets are subject to temporary distortions or other disruptions due to various factors, including lack of liquidity, the participation
of speculators, and government regulation and intervention. In addition, futures exchanges generally have regulations that limit the amount
of the Underlying Futures Contract price fluctuations that may occur in a single day. These limits are generally referred to as “daily
price fluctuation limits” and the maximum or minimum price of a contract on any given day as a result of those limits is referred
to as a “limit price.” Once the limit price has been reached in a particular contract, no trades may be made at a price beyond
the limit, or trading may be limited for a set period of time. Limit prices have the effect of precluding trading in a particular contract
or forcing the liquidation of contracts at potentially disadvantageous times or prices. These circumstances could delay the calculation
of the level of the Index and could adversely affect the level of the Index and any payments on, and the value of, your notes.
| · | The Performance of the Index Will Differ from
the Performance of the Index Underlying the Underlying Futures Contracts — |
A variety
of factors can lead to a disparity between the performance of a futures contract on an equity index and the performance of that equity
index, including the expected dividend yields of the equity securities included in that equity index, an implicit financing cost associated
with futures contracts and policies of the exchange on which the futures contracts are traded, such as margin requirements. Thus, a decline
in expected dividends yields or an increase in margin requirements may adversely affect the performance of the Index. In addition, the
implicit financing cost will negatively affect the performance of the Index, with a greater negative effect when market interest rates
are higher. During periods of high market interest rates, the Index is likely to underperform the equity index underlying the Underlying
Futures Contracts, perhaps significantly.
| · | NEGATIVE ROLL RETURNS ASSOCIATED WITH THE UNDERLYING FUTURES CONTRACTS MAY ADVERSELY
AFFECT THE LEVEL OF THE INDEX AND THE VALUE OF THE NOTES — |
The
Index tracks the excess return of the Underlying Futures Contracts. Unlike common equity securities, futures contracts, by their terms,
have stated expirations. As the exchange-traded Underlying Futures Contracts approach expiration, they are replaced by contracts of the
same series that have a later expiration. For example, an Underlying Futures Contract notionally purchased and held in June may specify
a September expiration date. As time passes, the contract expiring in September is replaced by a contract for delivery in December. This
is accomplished by notionally selling the September contract and notionally purchasing the December contract. This process is referred
to as “rolling.” Excluding other considerations, if prices are higher in the distant delivery months than in the nearer delivery
months, the notional purchase of the December contract would take place at a price that is higher than the price of the September contract,
thereby creating a negative “roll return.” Negative roll returns adversely affect the returns of the Underlying Futures Contracts
and, therefore, the level of the Index and any payments on, and the value of, the notes. Because of the potential effects of negative
roll returns, it is possible for the level of the Index to decrease significantly over time, even when the levels of the underlying index
referenced by the Underlying Futures Contracts are stable or increasing.
PS-7
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
| o | THE INDEX COMPRISES NOTIONAL ASSETS AND LIABILITIES. THERE IS NO ACTUAL PORTFOLIO OF ASSETS TO WHICH ANY PERSON IS ENTITLED OR IN
WHICH ANY PERSON HAS ANY OWNERSHIP INTEREST. |
PS-8
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
The Index
The Index measures the performance of the nearest maturing
quarterly Underlying Futures Contracts trading on the Chicago Mercantile Exchange (the “Exchange”). The Underlying Futures
Contracts are U.S. dollar-denominated futures contracts based on the S&P 500® Index. The S&P 500®
Index consists of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For additional information
about the Index and the Underlying Futures Contracts, see Annex A in this pricing supplement.
Historical Information
The following graph sets forth the historical performance
of the Index based on the weekly historical closing levels of the Index from January 4, 2019 through July 19, 2024. The closing level
of the Index on July 24, 2024 was 468.73. We obtained the closing levels above and below from the Bloomberg Professional®
service (“Bloomberg”), without independent verification.
The historical closing levels of the Index should
not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Index on the Observation
Date. There can be no assurance that the performance of the Index will result in the return of any of your principal amount in excess
of $150.00 per $1,000 principal amount note, subject to the credit risks of JPMorgan Financial and JPMorgan Chase & Co.
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_003.jpg)
Tax Treatment
In determining our reporting responsibilities, we intend
to treat the notes for U.S. federal income tax purposes as “open transactions” that are not debt instruments, as described
in the section entitled “Material U.S. Federal Income Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated
as Open Transactions That Are Not Debt Instruments” in the accompanying product supplement no. 4-I. Based on the advice of Davis
Polk & Wardwell LLP, our special tax counsel, we believe that this is a reasonable treatment, but that there are other reasonable
treatments that the IRS or a court may adopt, in which case the timing and character of any income or loss on the notes could be materially
and adversely affected.
No statutory, judicial or administrative authority directly
addresses the characterization of the notes (or similar instruments) for U.S. federal income tax purposes, and no ruling is being requested
from the IRS with respect to their proper characterization and treatment. Assuming this treatment is respected, the gain or loss on your
notes should be treated as short-term capital gain or loss, whether or not you are an initial purchaser of notes at the issue price. However,
the IRS or a court may not respect the treatment of the notes as “open transactions,” in which case the timing and character
of any income or loss on the notes could be materially and adversely affected. For instance, if the IRS were to succeed in recharacterizing
the notes as debt instruments, any gain at maturity or earlier disposition could be required to be treated as ordinary interest income,
among other potentially adverse consequences.
In addition, in 2007 Treasury and the IRS released a
notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments.
The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment.
It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
the relevance of factors such as the nature of the underlying property to which the
PS-9
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
instruments are linked; the degree, if any, to which
income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether investors in
short-term instruments should be required to accrue income. While the notice requests comments on appropriate transition rules and effective
dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect
the tax consequences of an investment in the notes, possibly with retroactive effect. You should review carefully the section entitled
“Material U.S. Federal Income Tax Consequences” in the accompanying product supplement and consult your tax adviser regarding
the U.S. federal income tax consequences of an investment in the notes, including possible alternative treatments and the issues presented
by this notice.
Section 871(m) of the Code and Treasury regulations promulgated
thereunder (“Section 871(m)”) generally impose a 30% withholding tax (unless an income tax treaty applies) on dividend equivalents
paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include
U.S. equities. Section 871(m) provides certain exceptions to this withholding regime, including for instruments linked to certain broad-based
indices that meet requirements set forth in the applicable Treasury regulations. Additionally, a recent IRS notice excludes from the scope
of Section 871(m) instruments issued prior to January 1, 2027 that do not have a delta of one with respect to underlying securities that
could pay U.S.-source dividends for U.S. federal income tax purposes (each an “Underlying Security”). Based on certain determinations
made by us, we expect that Section 871(m) will not apply to the notes with regard to Non-U.S. Holders. Our determination is not binding
on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your particular
circumstances, including whether you enter into other transactions with respect to an Underlying Security. If necessary, further information
regarding the potential application of Section 871(m) will be provided in the pricing supplement for the notes. You should consult your
tax adviser regarding the potential application of Section 871(m) to the notes.
The Estimated
Value of the Notes
The estimated value of the notes set forth on the
cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income debt component
with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative or derivatives underlying
the economic terms of the notes. The estimated value of the notes does not represent a minimum price at which JPMS would be willing to
buy your notes in any secondary market (if any exists) at any time. The internal funding rate used in the determination of the estimated
value of the notes may differ from the market-implied funding rate for vanilla fixed income instruments of a similar maturity issued by
JPMorgan Chase & Co. or its affiliates. Any difference may be based on, among other things, our and our affiliates’ view of
the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison
to those costs for the conventional fixed income instruments of JPMorgan Chase & Co. This internal funding rate is based on certain
market inputs and assumptions, which may prove to be incorrect, and is intended to approximate the prevailing market replacement funding
rate for the notes. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms
of the notes and any secondary market prices of the notes. For additional information, see “Selected Risk Considerations —
Risks Relating to the Estimated Value and Secondary Market Prices of the Notes — The Estimated Value of the Notes Is Derived by
Reference to an Internal Funding Rate” in this pricing supplement.
The value of the derivative or derivatives underlying
the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent on inputs such as
the traded market prices of comparable derivative instruments and on various other inputs, some of which are market-observable, and which
can include volatility, dividend rates, interest rates and other factors, as well as assumptions about future market events and/or environments.
Accordingly, the estimated value of the notes is determined when the terms of the notes are set based on market conditions and other relevant
factors and assumptions existing at that time.
The estimated value of the notes does not represent
future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could provide valuations
for the notes that are greater than or less than the estimated value of the notes. In addition, market conditions and other relevant factors
in the future may change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly
based on, among other things, changes in market conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements
and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market
transactions.
The estimated value of the notes will be lower than
the original issue price of the notes because costs associated with selling, structuring and hedging the notes are included in the original
issue price of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, the projected
profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the
estimated cost of hedging our obligations under the notes. Because hedging our obligations entails risk and may be influenced by market
forces beyond our control, this hedging may result in a profit that
PS-10
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
is more or less than expected, or it may result in
a loss. A portion of the profits, if any, realized in hedging our obligations under the notes may be allowed to other affiliated or unaffiliated
dealers, and we or one or more of our affiliates will retain any remaining hedging profits. See “Selected Risk Considerations —
Risks Relating to the Estimated Value and Secondary Market Prices of the Notes — The Estimated Value of the Notes Will Be Lower
Than the Original Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact any secondary
market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market Prices of the Notes
— Secondary market prices of the notes will be impacted by many economic and market factors” in the accompanying product supplement.
In addition, we generally expect that some of the costs included in the original issue price of the notes will be partially paid back
to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period.
These costs can include selling commissions, projected hedging profits, if any, and, in some circumstances, estimated hedging costs and
our internal secondary market funding rates for structured debt issuances. This initial predetermined time period is intended to be the
shorter of six months and one-half of the stated term of the notes. The length of any such initial period reflects the structure of the
notes, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the notes
and when these costs are incurred, as determined by our affiliates. See “Selected Risk Considerations — Risks Relating to
the Estimated Value and Secondary Market Prices of the Notes — The Value of the Notes as Published by JPMS (and Which May Be Reflected
on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this
pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand for products
that reflect the risk-return profile and market exposure provided by the notes. See “Hypothetical Payout Profile” and “How
the Notes Work” in this pricing supplement for an illustration of the risk-return profile of the notes and “The Index”
in this pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is equal to
the estimated value of the notes plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, plus (minus)
the projected profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the
notes, plus the estimated cost of hedging our obligations under the notes.
Additional
Terms Specific to the Notes
You may revoke your offer to purchase the notes at any
time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or
reject any offer to purchase, the notes prior to their issuance. In the event of any changes to the terms of the notes, we will notify
you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes, in which
case we may reject your offer to purchase.
You should read this pricing supplement together with
the accompanying prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term notes of which
these notes are a part, the accompanying prospectus addendum and the more detailed information contained in the accompanying product supplement
and the accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or
indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other
educational materials of ours. You should carefully consider, among other things, the matters set forth in the “Risk Factors”
sections of the accompanying prospectus supplement and the accompanying product supplement and in Annex A to the accompanying prospectus
addendum, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal,
tax, accounting and other advisers before you invest in the notes.
PS-11
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
You may access these documents on the SEC website
at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is
1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us” and
“our” refer to JPMorgan Financial.
PS-12
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
Annex
A
The S&P 500®
Futures Excess Return Index
All information contained in this pricing supplement
regarding the S&P 500® Futures Excess Return Index (the “SPX Futures Index”), including, without limitation,
its make-up, method of calculation and changes in its components, has been derived from publicly available information, without independent
verification. This information reflects the policies of, and is subject to change by, S&P Dow Jones Indices LLC (“S&P Dow
Jones”). The SPX Futures Index is calculated, maintained and published by S&P Dow Jones. S&P Dow Jones has no obligation
to continue to publish, and may discontinue the publication of, the SPX Futures Index.
The SPX Futures Index is reported by Bloomberg L.P.
under the ticker symbol “SPXFP.”
The SPX Futures Index measures the performance of
the nearest maturing quarterly E-mini® S&P 500® futures contracts (Symbol: ES) (the “Underlying
Futures Contracts”) trading on the Chicago Mercantile Exchange (the “Exchange”). E-mini® S&P 500®
futures contracts are U.S. dollar-denominated futures contracts based on the S&P 500® Index. For additional information
about the S&P 500® Index, see “Equity Index Descriptions — The S&P U.S. Indices” in the accompanying
underlying supplement. The SPX Futures Index is calculated real-time from the price change of the Underlying Futures Contracts. The SPX
Futures Index is an “excess return” index that is based on price levels of the Underlying Futures Contracts as well as the
discount or premium obtained by “rolling” hypothetical positions in the Underlying Futures Contracts as they approach delivery.
The SPX Futures Index does not reflect interest earned on hypothetical, fully collateralized contract positions.
Index Rolling
As each Underlying Futures Contract approaches maturity,
it is replaced by the next maturing Underlying Futures Contract in a process referred to as “rolling.” The rolling of the
SPX Futures Index occurs quarterly over a one-day rolling period (the “roll day”) every March, June, September and December,
effective after the close of trading five business days preceding the last trading date of the maturing Underlying Futures Contract.
On any scheduled roll day, the occurrence of either
of the following circumstances will result in an adjustment of the roll day according to the procedure set forth in this section:
| · | An exchange holiday occurs on that scheduled roll day. |
| · | The daily contract price of any Underlying Futures Contract within the index on that scheduled roll day is a limit price. |
If either of the above events occur, the relevant
roll day will take place on the next designated commodity index business day whereby none of the circumstances identified take place.
If a disruption is approaching the last trading day
of a contract expiration, the Index Committee (defined below) will convene to determine the appropriate course of action, which may include
guidance from the Exchange.
The Index Committee may change the date of a given
rebalancing for reasons including market holidays occurring on or around the scheduled rebalancing date. Any such change will be announced
with proper advance notice where possible.
Index Calculations
The closing level of the SPX Futures Index on any
trading day reflects the change in the daily contract price of the Underlying Futures Contract since the immediately preceding trading
day. On each quarterly roll day, the closing level of the SPX Futures Index reflects the change from the daily contract price of the maturing
Underlying Futures Contract on the immediately preceding trading day to the daily contract price of the next maturing Underlying Futures
Contract on that roll day.
The daily contract price of an Underlying Futures
Contract will be the settlement price reported by the Exchange. If the Exchange fails to open due to unforeseen circumstances, such as
natural disasters, inclement weather, outages, or other events, the SPX Futures Index uses the prior daily contract prices. In situations
where the Exchange is forced to close early due to unforeseen events, such as computer or electric power failures, weather conditions
or other events, S&P Dow Jones calculates the closing level of the SPX Futures Index based on (1) the daily contract price published
by the Exchange, or (2) if no daily contract price is available, the Index Committee determines the course of action and notifies clients
accordingly.
Index Corrections and Recalculations
S&P Dow Jones reserves the right to recalculate
an index at its discretion in the event that settlement prices are amended or upon the occurrence of a missed index methodology event
(deviation from what is stated in the methodology document).
PS-13
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
Index Governance
An S&P Dow Jones index committee (the “Index
Committee”) maintains the SPX Futures Index. All committee members are full-time professional members of S&P Dow Jones’
staff. The Index Committee may revise index policy covering rules for including currencies, the timing of rebalancing or other matters.
The Index Committee considers information about changes to the SPX Futures Index and related matters to be potentially market moving and
material. Therefore, all Index Committee discussions are confidential.
The Index Committees reserve the right to make exceptions
when applying the methodology of the SPX Futures Index if the need arises. In any scenario where the treatment differs from the general
rules stated in this document or supplemental documents, notice will be provided, whenever possible.
In addition to the daily governance of the SPX Futures
Index and maintenance of its index methodology, at least once within any 12-month period, the Index Committee reviews the methodology
to ensure the SPX Futures Index continues to achieve the stated objectives, and that the data and methodology remain effective. In certain
instances, S&P Dow Jones may publish a consultation inviting comments from external parties.
License Agreement
JPMorgan Chase & Co. or its affiliate has entered
into an agreement with S&P Dow Jones that provides it and certain of its affiliates or subsidiaries, including JPMorgan Financial,
with a non-exclusive license and, for a fee, with the right to use the SPX Futures Index, which is owned and published by S&P Dow
Jones, in connection with certain securities, including the notes.
The notes are not sponsored, endorsed, sold or promoted
by S&P Dow Jones or its third-party licensors. Neither S&P Dow Jones nor its third-party licensors make any representation or
warranty, express or implied, to the owners of the notes or any member of the public regarding the advisability of investing in securities
generally or in the notes particularly or the ability of the SPX Futures Index to track general stock market performance. S&P Dow
Jones’ and its third-party licensors’ only relationship to JPMorgan Financial or JPMorgan Chase & Co. is the licensing
of certain trademarks and trade names of S&P Dow Jones and the third-party licensors and of the SPX Futures Index which is determined,
composed and calculated by S&P Dow Jones or its third-party licensors without regard to JPMorgan Financial or JPMorgan Chase &
Co. or the notes. S&P Dow Jones and its third-party licensors have no obligation to take the needs of JPMorgan Financial or JPMorgan
Chase & Co. or the owners of the notes into consideration in determining, composing or calculating the SPX Futures Index. Neither
S&P Dow Jones nor its third-party licensors are responsible for and has not participated in the determination of the prices and amount
of the notes or the timing of the issuance or sale of the notes or in the determination or calculation of the equation by which the notes
are to be converted into cash. S&P Dow Jones has no obligation or liability in connection with the administration, marketing or trading
of the notes.
NEITHER S&P DOW JONES, ITS AFFILIATES NOR THEIR
THIRD-PARTY LICENSORS GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE SPX FUTURES
INDEX OR ANY DATA INCLUDED THEREIN OR ANY COMMUNICATIONS, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATIONS (INCLUDING ELECTRONIC
COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES, ITS AFFILIATES AND THEIR THIRD-PARTY LICENSORS SHALL NOT BE SUBJECT TO ANY DAMAGES
OR LIABILITY FOR ANY ERRORS, OMISSIONS OR DELAYS THEREIN. S&P DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS
ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE MARKS, THE SPX
FUTURES INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES,
ITS AFFILIATES OR THEIR THIRD-PARTY LICENSORS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING
BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE.
“S&P®” and “S&P
500®” are trademarks of S&P Global, Inc. or its affiliates and have been licensed for use by JPMorgan Chase &
Co. and its affiliates, including JPMorgan Financial.
Background on Futures Contracts
Overview of Futures Markets
Futures contracts are contracts that legally obligate
the holder to buy or sell an asset at a predetermined delivery price during a specified future time period. Futures contracts are traded
on regulated futures exchanges, in the over-the-counter market and on various types of physical and electronic trading facilities and
markets. An exchange-traded futures contract provides for the purchase and sale of a specified type and quantity of an underlying asset
or financial instrument during a stated delivery month for a fixed price. A futures contract provides for a specified settlement month
in which the cash settlement is made or in which the underlying asset or financial instrument is to be delivered by the seller (whose
position is therefore described as “short”) and acquired by the purchaser (whose position is therefore described as “long”).
PS-14
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
No purchase price is paid or received on the purchase
or sale of a futures contract. Instead, an amount of cash or cash equivalents must be deposited with the broker as “initial margin.”
This amount varies based on the requirements imposed by the exchange clearing houses, but it may be lower than 5% of the notional value
of the contract. This margin deposit provides collateral for the obligations of the parties to the futures contract.
By depositing margin, which may vary in form depending
on the exchange, with the clearing house or broker involved, a market participant may be able to earn interest on its margin funds, thereby
increasing the total return that it may realize from an investment in futures contracts.
In the United States, futures contracts are traded
on designated contract markets. At any time prior to the expiration of a futures contract, a trader may elect to close out its position
by taking an opposite position on the exchange on which the trader obtained the position, subject to the availability of a liquid secondary
market. This operates to terminate the position and fix the trader’s profit or loss. Futures contracts are cleared through the facilities
of a centralized clearing house and a brokerage firm, referred to as a “futures commission merchant,” which is a member of
the clearing house.
Unlike common equity securities, futures contracts,
by their terms, have stated expirations. At a specific point in time prior to expiration, trading in a futures contract for the current
delivery month will cease. As a result, a market participant wishing to maintain its exposure to a futures contract on a particular asset
or financial instrument with the nearest expiration must close out its position in the expiring contract and establish a new position
in the contract for the next delivery month, a process referred to as “rolling.” For example, a market participant with a
long position in a futures contract expiring in November who wishes to maintain a position in the nearest delivery month will, as the
November contract nears expiration, sell the November contract, which serves to close out the existing long position, and buy a futures
contract expiring in December. This will “roll” the November position into a December position, and, when the November contract
expires, the market participant will still have a long position in the nearest delivery month.
Futures exchanges and clearing houses in the United
States are subject to regulation by the Commodity Futures Trading Commission (the “CFTC”). Exchanges may adopt rules and take
other actions that affect trading, including imposing speculative position limits, maximum price fluctuations and trading halts and suspensions
and requiring liquidation of contracts in certain circumstances. Futures markets outside the United States are generally subject to regulation
by foreign regulatory authorities comparable to the CFTC. The structure and nature of trading on non-U.S. exchanges, however, may differ
from the above description.
Underlying Futures Contracts
E-mini® S&P 500®
futures contracts are U.S. dollar-denominated futures contracts, based on the S&P 500® Index, traded on the Exchange,
representing a contract unit of $50 multiplied by the S&P 500® Index, measured in cents per index point.
E-mini® S&P 500®
futures contracts listed for the nearest nine quarters, for each March, June, September and December, and the nearest three Decembers
are available for trading. Trading of the E-mini® S&P 500® futures contracts will terminate at 9:30
A.M. Eastern time on the third Friday of the contract month.
The daily settlement prices of the E-mini®
S&P 500® futures contracts are based on trading activity in the relevant contract (and in the case of a lead month
also being the expiry month, together with trading activity on lead month-second month spread contracts) on the Exchange during a specified
settlement period. The final settlement price of E-mini® S&P 500® futures contracts is based on the
opening prices of the component stocks in the S&P 500® Index, determined on the third Friday of the contract month.
PS-15
| Structured Investments
Capped Dual Directional Buffered Equity Notes Linked to the
S&P 500® Futures Excess Return Index |
![](https://www.sec.gov/Archives/edgar/data/1665650/000101376224001214/image_001.jpg) |
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