FedEx (FDX) recently announced its FedEx Express business unit would increase shipping rates 3.5% starting next year for cargo. In addition, FedEx indicated it would increase rates for ground shipments next year. The stock price of FedEx’s rival United Parcel Service (UPS) plunged 17% in July/August of this year after reporting mediocre earnings and a poor outlook for the coming year. UPS’s stock price has since recovered somewhat since the July/August drop but UPS’s stock price is still down 10% from its top.
FedEx’s second largest expense after it’s expenses for employees’ salaries is fuel. FedEx implements fuel surcharges to aid in mitigating large fluctuations in fuel prices, but in the past FedEx has capped fuel surcharges in order to remain competitive, which occasionally has a negative affect on its bottom line profit.
With FedEx increasing shipping rates and with the declining cost of FedEx’s fuel expense, the next few months look very positive for FedEx. And with UPS’s stock price having been beaten down in the last year and with a positive fuel cost environment, UPS appears to have a flat-to-bullish outlook for the next months. With the bullish outlook for FDX and the flat-to-bullish outlook for UPS, a covered call investing strategy may be in order for both of these companies.
Using PowerOptions’ OneStrike stock options search tool to search for covered call investing positions for FDX and UPS revealed the following positions for December of 2006:
| PowerOptions OneStrike for FDX & UPS November 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot. |
%If Unch. |
%If Asgnd. |
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| FDX | 116.11 (+1.36) | FDXLC | 06 DEC 115.0 (33) | 3.80 | 3.3 | 2.4 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FDX | 116.11 (+1.36) | FDXLD | 06 DEC 120.0 (33) | 1.50 | 1.3 | 1.3 | 4.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UPS | 76.00 (+0.44) | UPSLO | 06 DEC 75.0 (33) | 2.05 | 2.7 | 1.4 | 1.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UPS | 76.00 (+0.44) | UPSLP | 06 DEC 80.0 (33) | 0.20 | 0.3 | 0.3 | 5.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The OneStrike search for FDX and UPS returned four positions with potential returns ranging from 0.3% to 4.7% (33 days). None of the UPS positions found by the OneStrike tool exhibited overly attractive returns (0.3% to 1.4%). The potential return of the second FDX covered calls position for an unchanged stock price (1.3%) wasn’t very inspiring either but the potential return in the event the stock price climbs above the $120 strike price of the option is attractive (4.7%). The best position of all four is probably the first FDX covered calls investing position exhibited a very healthy potential return of 2.4% with downside protection of 3.3%, not bad for an investment of only 33 days.
Since the search for covered calls positions for UPS returned mediocre positions, the PowerOptions suite of tools can be used to search for alternative UPS stock options positions. For example, a search for UPS covered calls positions for other months could be executed. Or, a search for other neutral or bullish strategies could also be executed with PowerOptions tool suite: bull put spreads, iron condor and calendar options, for example.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.
PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute bullish, bearish or neutral strategies for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing stock options positions.
PowerOptions’ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.
[tags]FDX, Federal Express Corp., UPS, United Parcel Service Inc., bull put spreads, calendar options, covered call investing, covered call investment strategy, investment strategy, iron condor, option income, poweroptions, stock option trading, stock options[/tags]