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Options traders are waxing optimistic ahead of earnings from FedEx Corporation (NYSE:FDX), as evidenced by the growing appetite for long calls. During the course of Friday's session, the package delivery concern saw roughly 7,900 calls change hands -- almost twice the norm. Meanwhile, fewer than 2,900 FDX puts crossed the tape.
Most popular was the out-of-the-money June 105 call, which saw more than 3,400 contracts traded at a volume-weighted average price (VWAP) of $0.55. Most of the calls crossed on the ask side, and open interest skyrocketed over the weekend, pointing to newly bought bullish bets.
To profit on the play, the buyers need FedEx Corporation to topple $105.55 (strike price plus VWAP) by the end of the week -- which encompasses the company's turn in the earnings confessional on Wednesday. From FDX's current perch at $99.63, it would take a rally of roughly 6% in order for the buyers to hit breakeven. Risk, meanwhile, is limited to the initial premium paid for the calls.
As alluded to earlier, Friday's preference for calls merely echoes the growing trend seen on the major options exchanges. During the past couple of weeks, option buyers have picked up more than two FDX calls for every put on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, the equity's 10-day call/put volume ratio of 2.07 ranks in the 86th percentile of its annual range, suggesting traders are purchasing FDX calls over puts at a much faster-than-usual pace.
As a result, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.82 sits just 5 percentage points from a 52-week low. Or, in simpler terms, near-term options traders have rarely been more call-heavy during the past year.
In similar fashion, 15 out of 20 analysts maintain "buy" or better opinions of FDX, while short interest accounts for a scant 1.4% of the stock's total available float.
Historically speaking, FedEx's post-earnings reactions are nothing to write home about. In the past three quarters, the equity has been lower in the week after its earnings release, averaging a loss of 4.4%. Should FDX once again disappoint, an unwinding of optimism on Wall Street could translate into contrarian headwinds for the stock.