A week ago I gave an update on FedEx’s (FDX, $75.01, down $3.78) after United Parcel Service (UPS, $59.73, down $1.74) lowered earnings. I mentioned then that both these stocks could continue lower if oil keeps heading higher. Oil was $138 a week ago and it is clear these companies can’t raise shipping prices fast enough (right?) to offset the cost. Both stocks are trading at fresh 52-week lows.
FedEx is getting hammered today after lowering its shipping costs in China despite higher fuel costs. It is a fiercely competitive market and one that FedEx just entered a year ago. The company cut its prices on its overnight services by as much as 80%. Yeah, the market took that one as well as a Baby-Ruth candy bar in a punchbowl.
The FedEx July 80 puts (FDXSP, $5.60, up $2.65) are having a MONSTER day as they are up a blistering 90%. We were lucky enough to get in the put options at $1.59 and had set a stop of $2.75. This was never hit and today’s move will give us a money-in-the-bank 200% return if stops are set in the $4.80-$4.90 range.