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FedEx has shed 13% this week, and traders see more pain ahead

Options traders think things are about to get worse for FedEx

Investors are shipping out of FedEx.

The stock has shed 13% since FedEx's earnings report on Tuesday, the share-price losses accelerated by a wave of downgrades from analysts at Deutsche Bank, Stifel, Keybanc and BMO. They cut their ratings to neutral after the company missed earnings estimates and lowered its 2020 forecast, citing trade tensions of government policy uncertainties.

Wednesday marked FedEx's worst trading day since December 2008. But that didn't stop options traders from betting on more pain, says Michael Khouw, co-founder and chief strategist at Optimize Advisors.

"We saw well over 10 times the average daily options volume today," Khouw said Wednesday on CNBC's "Options Action." Khouw was trimming his own FedEx position during the declines.

"It wasn't just a bad day for Federal Express," he added. "It was obviously a bad day for people who had positions in FedEx."

The most active options trades were purchases of the September $150 puts expiring Friday. Khouw saw 10,000 of them trade for roughly $2.25 each on Wednesday morning following the earnings release.

"Buyers of those puts were betting that the stock was going to decline below that [$]150 strike price by the end of the week by at least the $2.25 that they paid," Khouw said. That represents a bet that FedEx will fall another 2% by week's end.

Shares of FedEx actually did decline to around $148.50 intraday on Wednesday before closing just below $151, Khouw noted.

And, for Khouw, FedEx's slide was personal.

"I took about 80% of my FedEx options position off today," he said. "I had the $160, $180 and $200 strikes on. And I think it's probably an advisable thing for most people who have positions in this to try to reevaluate."

But for those who don't have positions in FedEx, Khouw understood the impulse to capitalize on the shipping company's pain.

"This was definitely out of left field, I think, from the options market's perspective, but people are lining up for more volatility ahead," he said.

FedEx was down nearly 1% in early trading Thursday.