FedEx (FDX, $85.74, down $0.29) will report earnings Wednesday morning and I thought I would take a look at how things are shaping up in the June and July option contracts heading into the call. The stock has been punished by rising fuel costs falling from nearly a $100 in May to its current level. Wow. Wall Street expects the company to deliver earnings of $1.47 a share on revenue of $9.6 billion.

Due to the continued rise in oil, FedEx recently lowered earnings estimates from an average of $1.70 to the current $1.47 level. It seems like all of the bad news has been priced into the stock but with it sitting near 52-week lows, investors should be careful of catching a falling knife. Too many things can go wrong when earnings are announced and option traders are leaning more toward the put side of FedEx.

The June 90 puts (FDXRR, $4.79, down $0.01) are holding steady and are the most heavily traded puts at the moment for the June contracts. Volume is also picking up in the July 80 puts (FDXSP, $1.59, up $0.04) which are out-of-the-money. There has been no decline in oil since FedEx warned and that has me worried.

FedEx may be too risky to play right now but is beginning to look attractive if oil ever comes back down to reasonable levels.

Rick Rouse