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Why FedEx Is Cheap and the Case Against Nike

Two global companies, two very different trades. That sums up Friday’s Options Action, where the traders found a reason to be bearish, and then a company to get bullish on.

First, the bearish trade. RiskReversal.com’s Dan Nathan made the case that a global slowdown would cause pain for Nike . This, in addition to weakening footwear trends, gave him ample reason to put on a bearish trade.

Dan suggested buying the 97.5/92.5 put spread for $1.25. His trade and payout are below.

DAN’S NIKE TRADE

  • BUY THE JULY 97.50-STRIKE PUT FOR $2.60
  • SELL THE JULY 92.50-STRIKE PUT FOR $1.35

HOW DAN’S NIKE TRADE MAKES MONEY

  • LOSSES ABOVE $96.25
  • PROFITS BETWEEN $96.25 AND $92.50
  • PROFITS CAPPED AT $92.50

On to the bullish trade. Oppenheimer’s Carter Worth took a look at FedEx , and argued that not only does the chart look attractive, but the stock is incredibly cheap. He pointed out that FedEx is trading at the same P/E multiple as the S&P, which is as cheaply as you’ll be able to ever be able to buy it, in Carter’s estimation.

CRT Capital’s Mike Khouw agreed that FedEx is a bargain. He suggested making a bullish bet by buying the August 92.5-strike call for $2.50. The trade and breakdown:

MIKE’S FEDEX TRADE

  • BUY THE AUGUST 92.50 STRIKE CALL FOR $2.50

HOW MIKE’S FEDEX TRADE MAKES MONEY

  • PROFITS ABOVE $95.00
  • LOSSES BELOW $95.00


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