FDX: Wish I Could Short the Post Office
Although shorting the USPS is not possible, one can short FedEx (FDX - Get Report), a large Post Office contractor. The company is likely to lose part of its billion dollar contract if it does not volunteer to cut costs. To play this I like the idea of a vertical call spread.
Trades: Sell to open FDX October 80 calls at $1.46 and buy to open FDX October 82.5 call for $0.95.
The net credit on this spread is $0.51 which is our potential maximum profit. The risk is strictly limited to the 2.5 strike price differential less the credit, or $1.99. The net delta on this trade is -.08, so this is like being short eight shares of the stock. One can consider that in deciding how large a position to put on. The trade will also benefit from a favorable theta burn of .006 per day.
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