Unusual Options Activity: FedEx Corporation (FDX)

Shares of freight and logistics company FedEx Corporation (FDX) have lost over one-third of their value in the past year. One trader is betting on a further decline.

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  • That’s based on the July $180 put. With 56 days until expiration, 15,182 contracts traded compared to a prior open interest of 661, for a 23-fold rise in volume on the trade. The buyer of the puts paid $6.80 to get in.

    Shares are a little bit off their 52-week low of $193, so a drop to $180 would represent a new low for shares.

    Earnings are up nearly 25 percent over the past year, and revenue is up about 10 percent, but those numbers were based on last year’s global economic recovery, and could soon shift into a negative trend.

    As a shipping and logistics company, FedEx is perfectly poised to quickly price in changes in global trade, making this short-side bet an interesting one now.

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  • Action to take: The stock will soar once the current fears in the global economy wane. But we’re not at that stage yet. So even with shares yielding 1.4 percent now, patient traders can get a higher starting dividend.

    For traders, the July puts should play out perfectly, as that’s about when we’ll know if we’re officially in a recession or not. Traders can likely play a further decline in shares to mid-to-high double-digit returns with this option trade.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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