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Long Calls on FedEx (FDX)

Let's see if FDX can deliver


People seldom think about how their packages are delivered. They simply order something and choose what method they want it delivered. Here is a well though out trade idea on a company whose goal is to deliver and make a profit just like this option play.

FedEx Corp. (FDX): Long Calls

The trade: Buy the October 115 calls for 2.40 or less.

The strategy: Buying a call option is probably the most fundamental option strategy. The trade can profit if the stock moves higher and the call premium increases to an amount more than was paid. Maximum profit is theoretically unlimited because FDX can continue to rise and the maximum loss is $2.40 or whatever was paid for the option if FDX finishes below $115 at October expiration. Breakeven is $117.40 at expiration based on a cost of $2.40.    

8-23-13-FDXchartThe rationale: Most people are quite familiar with FedEx and have probably received a package delivered by them at some point in their life. The company has a market cap of about $34.5 billion and is generally well-regarded by many analysts even though their net income growth could be perceived as being somewhat weak. That being said, this trade idea’s success really depends upon more of the technicals of the stock then the fundamentals of the company.

Since the beginning of August, the stock has been able to hold a bullish base above $108. The stock has prior pivot areas from previous highs at around $110. On Thursday the stock closed above that area and at its highest level since 2007. Knowing that most breakouts (a move over resistance) fail, the stock may come back and retest the prior resistance which is now support before trying to move higher. A possible break of resistance and a several week hold of a bullish base, look like a possible recipe for a surge higher in the stock. Be cognizant that FedEx is scheduled to announce their earnings on September 18 and it might be a good time to exit the position. Earnings announcements can create volatile movements in the stock. Let’s see if FedEx can deliver!


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