Tomorrow: A Big Day for FedEx

Look for Earnings to Fuel a Big Move

By Bryan Bottarelli
Tuesday, June 20, 2006 4:08 PM EST
Tue, 20 Jun 2006 21:08:00 GMT

Dear Bottarelli Research Member,

Tomorrow will be in interesting day for FedEx (FDX – NYSE).

Of course, the company must first address the impact of rising oil prices on their worldwide fleet of trucks and jets. How this will impact an earnings number that’s projected to come in between $1.65 and $1.80 per share (with Wall Street expectations at the high end of that range at $1.77) is still anyone’s guess.

In many respects, that’s why you’ve seen a slow price appreciation today in both your FDX July 120 Calls ( FDX GD) and your FDX July 100 Puts (FDX ST). If you recall, we paid a total of $1.32 to enter this basket yesterday, and as I write, this total basket carries a value of $1.65. That’s a 25% gainer beforeFDX even announces their earnings!

FDX

From what I’m hearing, floor specialists are expecting FedEx to report profits in-line with expectations. And since the company historically offers conservative forward guidance, it looks like FDX will be moving down tomorrow — which means great things for our July 100 puts. Then again, I could be wrong — and that’s why we own the calls as well. Either way you spin it, I think we got into the basket for just the right price. Look for continued guidance on this position tomorrow.

Looking at our other positions, both Pepsi (PEP – NYSE) and Las Vegas Sands (LVS – NYSE) spent most of the day in the green. Like I said before, PEP is a shower-moving stock that I expect to hold onto a little longer, while LVS tends to move in large price increments. The trick for LVS is to own calls on the day the stock makes a big up-move, which could realistically happen at any time.

LVS

I’m also very comfortable holding our downside protective position, the DJX July 110 Puts (DJV SF). Similar to FedEx, I think we got a great entry price at $1.65 on these puts. They traded for a high of $2.05 yesterday and $1.90 today, while offering us a very nice way to profit on any market down-moves.

All told, a position that includes a DJX protective put, a FDX strangle (which is a call and a put), a speculative LVS call, and a more conservative PEP call offers you a very well-balanced trading ledger. Depending on what the market throws our way, we’ll always be in position to take a profit! So cross your fingers for a big move on FDX and we’ll talk more tomorrow. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From June 2006