Tuesday, September 3, 2013

FedEx Corporation (FDX) - Volatility Breaches Annual High Well Ahead of Earnings; Market BellWether Risk is Here

FDX is trading $107.60, up 0.2% with IV30™ up 1.3%. The LIVEVOL® Pro Summary is below.


Livevol Execution: Complex Trading Simplified

Click to Learn More

FedEx Corporation (FedEx) is a holding company. The Company provides a portfolio of transportation, e-commerce and business services under the FedEx brand.

I found this stock using an elevated volatility scan ad it's a follow up to the post I wrote on 8-25-2013. You can read that post by clicking on the title, below:

No Noise, Here are the Facts, and Why: The Market Will Go Up. The Market Will Go Down.

FDX is bellwether, and the option market is reflecting elevated volatility well ahead of earnings due out in mid Sep.

The two-year FDX Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side we can see that the price is right at a multi-year high (which it reached on 8-26-2013). In fact, two-years ago this was a sub $80 stock and just a few months ago it was trading at ~$93. But it's the vol that caught my eye.

I've included the two-year IV30™ chart in isolation, below.

At first glance we see an implied that in all respects looks unremarkable relative to its past. But that's just the first glance. In fact, the current IV30™ is at a annual high, breaching the 30% level for the first time since Jun 2012. I bring this up for two reasons:

(1) FDX is at an annual high and is another one of those socks that measures much more than its own results when earnings come out, but rather an evergreen type of measure like WMT, HD, etc. As I alluded to in the prior post on 8-25-2013, retailers looked terrible (Walmart (WMT), Macy’s (M), Nordstrom (JWN), Target (TGT) and Staples (SPLS)) but the do-it-yourself guys (HD and LOW) were booming. So we're squarely in "I don't know land." It's the same picture in housing where we have two phenomena:

a. The latest data show existing home sales — which account for more than 90% of the housing market — are up 17% from the levels of last summer.
b. The latest data also show that new-home sales, which have less of a lag than the existing-home numbers and may better reflect real-time conditions, fell unexpectedly to a nine-month low.

"I don't know land" means uncertainty, and that means risk. For FDX, that means an annual high in the implied well ahead of earnings.

(2) Even though FDX is at an annual high in the implied, it has been much higher in the fairly recent past, hitting just below 50% about two-years ago. It would not surprise me to see the implied for FDX go well in to the 35% range -- a level not reached in well over a year but a level that is not uncharted territory for the stock.

Finally, let's look to the Options Tab (below).

Sep vol is priced to 32.58% while Oct is priced to 27.89%. In another post I wrote on FDX on my personal blog on 8-28-2013, I wrote:

"It would not surprise me to see the implied for FDX go well in to the 30%-35% range." Well, we're there and now I see it potentially going to the upper level of that range. The real question is -- ow abrupt will the market react to the earnings? A part of that answer depends on how abrupt the results are. If the earnings are "ho-hum," it could be a non-event, but if the results are consumed by the market as a major indicator of economic direction (one way or the other), this single stock could have a big effect on the broader indices. Interestingly, FDX reports 9-18-2013 BMO, right on the second that VIX Sep options expire. Yikes...

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment