• Trading 101: A Look at FedEx Ahead of Earnings

    by  • September 17, 2013 3:51 pm • Trading 101 with Peter Bryans • 0 Comments

    FedEx (FDX) is set to report earnings tomorrow (9/18/13) before the market opens. Many like to look at the earnings results as a potential indicator for how things are going in the economy–if the company crushes estimates, then perhaps this is a sign that business activity is picking up for the transportation firm, as demand for their services increases. On the flip side, any number that is well below estimates, and some may interpret this as a bearish sign for the sector. Analysts will, of course, also be paying close attention to forward guidance. Nonetheless, players in the options market have been making their bets all day.

    FDX is up nearly 20 percent year-to-date (YTD), and it is possible that some traders are hedging their bets via protective puts. Below the featured chart, I have the most active stock options from today, 9/17/13. This data is courtesy of Trade Alert.

    (courtesy of StockCharts.com)

     Most Active Stock Options

    >>    1803 FDX Sep-13 107.0 P  OPENING
    >>    1527 FDX Sep-13 105.0 P
    >>    1470 FDX Sep-13 110.0 P    OPENING
    >>    1232 FDX Oct-13 120.0 C    OPENING

    It appears that a lot of this put activity is being bought (to open) on the 105/107/110 strikes. With the equity trading near $110 today, the lower strikes (105 and 107) could be hedges for those that are long the shares. In the event of a downside gap tomorrow morning, these puts will allow the traders to sell their shares at the strike price.

    Also, with the opening activity at the 110-strike, it is more likely that these puts are a bearish bet against the equity. These are at-the-money (ATM) options, seeing as the stock is trading right around the strike price. The traders stand to gain if the stock breaks below the 110-level by this Friday. The monthly expiration date is always the third Friday of every month (although certain options have expiry dates every Friday–but that’s a topic for another time).

    We’ll see how these short-term hedges and/or bets against the equity play out tomorrow morning.


    Peter Bryans joined the Schaeffer's Investment Research trading team as a Trader in April, 2012. A graduate of the Fisher College of Business at The Ohio State University -- where he concentrated in Finance -- Peter previously held internships with an insurance broker and a wealth-management firm. In his current role, Peter trades a variety of our real-time option services and also hosts our "Options Apprentice" weekly webinar presentations.


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