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FedEx Option Traders Place Pre-Earnings Bets

Investors are honing in on FDX's September 90 strike

by 9/17/2012 2:42 PM
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Options traders are targeting FedEx Corporation (NYSE:FDX - 89.17) today, with both calls and puts flying off the shelves. In afternoon trading, the stock has seen roughly 8,100 calls and 9,300 puts change hands -- more than doubling its average intraday option activity.

Most active has been the near-the-money September 90 strike, which has seen roughly 2,300 calls and 2,500 puts change hands. However, most of the options have traded between the bid and ask prices, making it difficult to discern whether they're being bought or sold.

Widening our sentiment scope, it seems the options crowd has been accumulating bearish bets ahead of FDX's turn in the earnings spotlight tomorrow. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 10-day put/call volume ratio of 1.33. This ratio registers in the 72nd percentile of its annual range, suggesting options players have purchased FDX puts over calls at a faster-than-usual clip during the past couple of weeks.

As a result, the stock's Schaeffer's put/call open interest ratio (SOIR) sits at 1.63, indicating that puts comfortably outnumber calls among options expiring within three months. What's more, this ratio stands just six percentage points from a 52-week peak, implying that near-term traders have rarely been more put-heavy during the past year.

Echoing that skepticism, short interest climbed 10% during the past month. In fact, it would take nearly a week to repurchase all of these pessimistic positions, at FDX's average daily trading volume.

However, not everyone on Wall Street is singing a bearish tune. Currently, FDX boasts 15 "strong buy" endorsements from analysts, compared to six lukewarm "holds" and not a single "sell" suggestion. Likewise, the consensus 12-month price target of $104.17 represents expected upside of 16% to FDX's closing price of $90.15 on Friday, and stands in territory not charted since late 2007.

On the charts, the shares of FDX have underperformed the broader S&P 500 Index (SPX) by 10 percentage points during the past 60 sessions. From a longer-term perspective, the equity has been stuck in a trading range, with its 50-week moving average limiting pullbacks, and the $95 region halting its rally attempts.

Historically, the shipping concern has surpassed the Street's per-share profit projections in each of the past four quarters, according to Thomson Reuters. However, the company recently warned that tomorrow's figures will fall short of initial forecasts.

Weekly Chart of FDX since April 2010 With 50-Week Moving Average


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