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New Plays

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PLAY: FDX - $96.04 Federal Express ** No Stop **

Federal Express reported stronger than expected earnings on Thursday with net income up +53% and revenue up +21%. They hit a high near $102 in early March but returned to the bottom of their range at $96 after the earnings announcement. This is the entry we were waiting for.

FDX warned that higher oil prices could crimp earnings in the current quarter. Still according to FDX customer demand was so strong that it was driving new investment in aircraft, facilities and technology.

Comparing the FDX earnings with UPS it appears FDX is the clear winner and taking substantial market share away from UPS. On a broader note Yellow Roadway said on Friday that freight tonnage was at an all time high. They raised rates +4.5% and their fuel surcharge to 11%. FDX is the premium shipper in the sector and they are also having no problems with rates. According to UPS the fuel surcharge is turning into a profit center as the carriers learn how to hedge against oil prices. FDX already hedges but they also warned that rapid rises in crude could negate that hedge. You can bet that the fuel surcharges will continue to climb and earnings will remain at the top end of the spectrum.

Morgan Stanley said the FDX guidance to the top of the range was a positive sign and a couple cents of energy pressure was to be expected.

Target $96.00 for an entry on the next pullback.

2006 $100 LEAP Call WFX-AT @ $7.50

Insurance put:
April $95.00 FDX-PS currently $1.55
(Wait for Tuesday to buy if the market is positive.
Let some premium bleed away from the new month.)

Entry $96.00 (03/17)

PLAY: SMH - $32.44 Semiconductor Holders ** No Stop **

The semiconductor index broke 420 support midweek but garnered several buy recommendations. The S&P re-weighting took all the attention but the SOX is slowly approaching real support at 400. This equates to $32 on the SMH. I believe buyers will appear either at or just above that level.

We had been waiting for a dip to $33 for an entry and that came on Tuesday with very little decline the rest of the week. The Friday drop was index related in my opinion.

The current level is well above any attractive puts for insurance with a -2.50 move on the SMH a big move from this level. However real support could be found at $31 so I am going to recommend a 60 cent May put just in case. I believe we will know if this trade is going to be a winner very quickly.

2006 $35.00 LEAP Call YRH-AG @ $2.75

Insurance put:
May $30 Put SMH-QF currently 60 cents.
Wait for Tuesday or even Wednesday to buy the put so premium
can bleed from March expiration.

Entry $33 (03/15)

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