FedEx Put Options Active After Amazon Breakup

FDX stock is eyeing familiar support after confirming plans to split with AMZN

Andrea Kramer
Aug 7, 2019 at 2:17 PM
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Along with broad-market selling pressure, FedEx Corporation (NYSE:FDX) stock is feeling the heat today, after the delivery concern confirmed it will end its ground-delivery contract with Amazon.com (AMZN). The FAANG giant has been building its own delivery network, and FedEx in June warned that ending the duo's partnership will weigh on fiscal 2020 earnings. At last check, FDX shares are 1.6% lower at $158.56, and put options are trading at an accelerated clip.

FedEx stock is now testing familiar support in the $150-$155 area, which contained the security's fourth-quarter sell-off and acted as a floor in June and July. Rebound attempts in 2019, meanwhile, were halted by round-number resistance in the $200 area.

FDX stock chart aug 7

So far today, FDX has seen nearly 6,600 puts cross the tape -- about 50% more than its average intraday put volume. The equity's 30-day at-the-money (ATM) implied volatility (IV) of 34.2% is in the 85th percentile of its annual range, pointing to relatively inflated volatility expectations being priced into near-term options. Meanwhile, its 30-day ATM IV skew of 17.2% sits in the 85th percentile of its annual range. This means that FDX puts have been more expensive relative to their call counterparts, from an IV standpoint, only 15% of the time during the past year.

That said, it looks like some traders are attempting to capitalize on relatively pricey FedEx puts today, selling to open the October 145 put -- the most active option thus far. By writing the puts to open, the speculators expect FDX shares to remain north of $145 through the close on Friday, Oct. 18, when the options expire. In this best-case scenario, the puts will remain out of the money and expire worthless, allowing the sellers to retain the entire premium received at initiation.

Prior to today, options traders were upping the bullish ante on FDX via call options. On the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), investors bought to open more than two calls for every put on the stock during the past two weeks. The resulting 10-day call/put volume ratio of 2.30 is in the 88th percentile of its annual range, pointing to a much healthier-than-usual appetite for long calls over puts of late.

Elsewhere, despite the delivery stock's struggles on the charts of late, analysts also remain optimistic toward FDX. The security boasts 10 "buy" or better endorsements, compared to six lukewarm "holds" and only one "sell" rating. Should the security extend its August slide -- and potentially take out support in the $150-$155 neighborhood -- a round of analyst downgrades could exacerbate selling pressure on the shares.


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