FDX October 31st Options Begin Trading

The article details two options strategies for FedEx (FDX) stock, offering insights for investors seeking income or discounted entry. Selling the FDX $225.00 strike put, bid at $10.40, presents a potential 33.74% annualized return if it expires worthless (58% probability), effectively targeting a $214.60 acquisition cost if assigned. Conversely, a covered call utilizing the $235.00 strike, bid at $11.15, could yield a 7.79% total return if FDX shares are called away by October 31st, or a 35.64% annualized return if the option expires worthless (53% probability), with implied volatilities of 39% (put) and 43% (call) versus FDX's 36% trailing 12-month actual volatility.

Analysis

The current options market for FedEx (FDX) presents distinct opportunities for income generation and discounted stock acquisition. For investors looking to initiate a position, selling the $225 strike put contract offers an effective entry point at a cost basis of $214.60 per share, a notable discount from the current price of $228.37. This strategy carries a 58% probability of the option expiring worthless, which would result in a 4.62% return on the cash commitment, or an annualized yield of 33.74%. For existing shareholders, a covered call strategy using the $235 strike could generate a 7.79% total return if the stock is called away by the October 31st expiration. Alternatively, if the call expires worthless (a 53% probability), the premium provides a 4.88% return boost, annualizing to 35.64%. A key observation is the elevated implied volatility in both the put (39%) and call (43%) contracts relative to FDX's actual trailing twelve-month volatility of 36%, signaling that option premiums are currently rich compared to the stock's recent price behavior, enhancing the appeal of these option-selling strategies.

Key Decisions for Investors

• Investors bullish on FDX but seeking a lower entry point could consider selling the $225 strike put to either acquire shares at an effective cost of $214.60 or collect a 33.74% annualized premium if the stock remains above the strike.
• Current FDX shareholders could sell the $235 strike covered call to generate income, targeting a 35.64% annualized yield from the premium alone, while accepting that upside is capped at a 7.79% total return if the stock is called away.
• Given that implied volatility of 39-43% exceeds the stock's 36% historical volatility, the market is pricing in more future movement than has recently occurred, making premium-selling strategies like cash-secured puts and covered calls particularly attractive at this time.