FedEx (FDX) Delivered

by riskreversal January 18, 2017 10:18 am • Trade Ideas

On December 16th we previewed FedEx’s Q2 results and detailed a trade to play for a pullback in the stock, targeting the 185-180 area. Here was the trade and rationale at the time:

*FDX ($196) Buy the Jan 195/180/165 put fly for 3.00
  • Buy 1 Jan 195 put for 6.30
  • Sell 2 Jan 180 puts at 2.00 (4 total)
  • Buy 1 Jan 165 put for .70

Rationale – This trade captures both the upcoming earnings event and any market shenanigans to start 2017. It targets a wide range below where it could be profitable and risks only $3 to do so (about 1.5% of the underlying).

The stock moved lower following earnings and has continued to grind lower over the last month, now just above our 185 target. With the Stock 186.75 this trade is worth 8 dollars. At this point the trade is also nearly 100 deltas, so it’s essentially a stock short with only 2 days until expiration. It makes sense to take profits here and move on:

ACTION – Sold to close the FDX (186.75) 195/180/165 put fly at 8.00 for a 5.00 profit