FDX August 15th Options Begin Trading

Analysis of FedEx (FDX) options reveals potential strategies for investors, including selling put options at the $210 strike with a 71% probability of expiring worthless, offering a 3.24% return on cash commitment (20.38% annualized), and a covered call strategy at the $230 strike, yielding a potential 6.96% return if the stock is called away or a 4.90% boost (30.86% annualized) if the contract expires worthless, with a 52% chance of that occurring; implied volatilities for the put and call options are 40% and 38% respectively, compared to a trailing twelve-month volatility of 37%.

Analysis

The provided information details two specific options strategies for FedEx Corp (FDX), which is currently trading at $225.36 per share. Firstly, selling a cash-secured put contract at the $210.00 strike price, with a current bid of $6.80, could result in an effective share purchase price of $203.20, a discount of approximately 7% from the current share price. Analytical data indicates a 71% probability of this put option expiring worthless, which would generate a 3.24% return on the cash commitment, or an annualized return of 20.38% (termed YieldBoost). Secondly, for existing FDX shareholders, a covered call strategy involving selling the $230.00 strike call option, with a current bid of $11.05, is presented. If FDX stock is called away at the August 15th expiration, this strategy would yield a total return of 6.96% (excluding dividends, before commissions). The $230.00 strike is about 2% above the current stock price, and there is a 52% assessed probability of this call expiring worthless. Should it expire worthless, the collected premium would represent a 4.90% additional return, or an annualized YieldBoost of 30.86%. The implied volatility for the put option is 40% and for the call option is 38%, both slightly above the trailing twelve-month actual volatility of 37%, suggesting a modest premium in option prices relative to recent realized price movements.

Key Decisions for Investors

• Investors bullish on FDX but seeking a lower entry point than the current $225.36 could consider selling the $210 strike put, understanding the commitment to buy at $210 if the price falls below, or alternatively collecting a 3.24% premium if it expires worthless.
• Current FDX shareholders looking to generate income and willing to cap potential upside above $230 by August 15th might explore selling the $230 strike covered call, which offers a 6.96% return if called or a 4.90% premium yield if not.
• Given that implied volatilities are marginally higher than historical volatility, option selling strategies could be considered, but investors must weigh the potential returns against the risks of adverse price movements, such as the stock dropping significantly below $210 for put sellers or rallying substantially above $230 for covered call writers.