Interesting FDX Put And Call Options For July 25th

The article from Stock Options Channel discusses potential options strategies for FedEx (FDX). Selling a $210 put offers a 3.81% return if it expires worthless, with a 62% probability of that outcome, while a covered call strategy at $220 yields 6.15% if the stock is called away; the probability of the call expiring worthless is 50%, resulting in a 4.73% return.

Analysis

The article outlines two specific options strategies for FedEx (FDX) shares, which were trading at $216.91 at the time of writing. Selling a $210 strike put contract, approximately 3% out-of-the-money, offers a potential 3.81% return (27.81% annualized) on the cash commitment should it expire worthless, an outcome with a stated 62% probability; this strategy also presents an effective purchase price of $202.00 if assigned. Alternatively, for existing shareholders, selling a $220 strike covered call, approximately 1% out-of-the-money, could yield a total return of 6.15% if the stock is called away at the specified July 25th expiration. If this call expires worthless, an event with a 50% probability, it would generate an additional 4.73% premium return (34.50% annualized). The implied volatilities for the put (40%) and call (38%) are noted to be slightly above FDX's trailing twelve-month actual volatility of 37%, suggesting option premiums may be marginally elevated compared to recent historical price movements, which could be advantageous for option sellers. The article emphasizes that these strategies should be considered in conjunction with an analysis of FDX's business fundamentals and its recent trading history.

Key Decisions for Investors

• Investors interested in FDX could evaluate selling the $210 strike put to potentially acquire shares at an effective cost basis of $202.00 or to generate a 3.81% income if the option expires worthless, an outcome with a 62% probability.
• Existing FDX shareholders might consider selling the $220 strike covered call to potentially earn a 4.73% premium if it expires worthless (50% probability) or achieve a 6.15% total return if shares are called away by the July 25th expiration.
• Assess the current options pricing environment for FDX, where implied volatilities (38-40%) slightly exceed recent historical volatility (37%), potentially offering enhanced returns for option sellers, while also monitoring these volatility levels.
• Before executing either options strategy, conduct a thorough review of FedEx's underlying business fundamentals and stock performance to ensure alignment with individual investment goals and risk tolerance.