My 1st Credit Spread In Quite A While Would Of Been A Good One
I started following FedEx ever since I noticed negative divergence on the Transports a couple of years ago, but got really involved in following FedEx in December 2018. During an earning call in December, an analyst asked what was what is FedEx’s strategy to fend off competition from Amazon? The Chief Executive Frederick Smith said he thought Amazon is a wonderful “company” and it is a “good customer” of FedEx, but he didn’t see it as a peer competitor at this time, and for many reasons, he doubts it ever will be. Those were very bold words by the CEO at the time and that’s when I really got bearish on FedEx because of how Amazon was starting to be everywhere I looked.
But I wasn’t the only one starting to feel this way, at least not directly. Morgan Stanley believes Amazon Air represents 2% of potential revenue lost for FedEx this year. The firm sees that revenue loss accelerating to more than 10% by 2025. A year ago, Amazon said it’s leasing an additional 15 Boeing 737-800 cargo aircraft from partner GE Capital Aviation Services (GECAS, joining the five Boeing 737-800’s already leased from GECAS. And that hub Amazon is building in Kentucky, will be operational sometime in 2021.
NOTE: The hub, designed to cut Prime's two-day shipping in half, is expected to be Amazon's largest processing facility in the world, according to Air Cargo World.
FedEx has been eating those words ever. Late last year, Amazon announced it was no longer allowing third-party sellers to use FedEx’s ground-delivery shipping. That week when FedEx announced the earnings, FedEx lowered its fiscal 2020 forecast by roughly 9%, citing costs related to launching seven-day delivery and lost revenue from its split with the world's top online retailer. Amazon notified its third-party merchants that they could once again use FedEx’s Ground network to ship orders the following month, but was another sign for me at least that Amazon owns FedEx.
Wall Street heaped praise and a stock-rating upgrade on FedEx Corp. on Wednesday, after the delivery and logistics company surprised investors with a better-than-expected quarter despite the drying out of its more profitable business deliveries business amid the coronavirus pandemic.
Shares of FedEx FDX, +11.72% rallied more than 14% on Wednesday, putting them on track for their best one-day percentage gain since September 1986, when the company shed its ZapMail faxing service after losing millions with the venture. A close around current levels would be the highest in six months.
FedEx late Tuesday reported a fiscal fourth-quarter adjusted profit of $2.53 a share on sales of $17.4 billion.
Analysts at J.P. Morgan, led by Brian Ossenbeck, raised their rating on FedEx stock to their equivalent of buy, pinning the upgrade on the “solid EPS beat in tough conditions.”
In recent weeks, @khaleelkazi has been killing it with his credit spreads. During our weekly Leo Podcasts, he has been taking notes and incorporating options strategies into his trading methodologies. It’s been really cool to see him evolve in just a couple of weeks, but I decided I can’t let him have all the fun.
In recent days, I have dusted off my option notes, specifically credit option strategies. Today, I placed a bear call credit spread on FedEx after the bell opened as price jumped and hovered around the $163 level…only to find out that order was rejected.
When I called by broker, they said I wasn’t approved for credit spreads and that I needed to upgrade my account. So I’m hoping to be approved tomorrow, so I can join @khaleelkazi.
Regarding FedEx, just as I speculated price fell nearly $8 the rest of the day to close at roughly $156. If I approved to trade credit spreads tomorrow, I will revisit FedEx, but I think the opportunity for me to deploy a credit spread was at the opening bell today.
No sweat, the Market always give you other opportunities to make….or lose money.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted Using LeoFinance
