Back to Main

Bulls stay in Expeditors International

By: optionMONSTER
Posted: 12/31/2012 4:47:00 AM
Referenced Stocks: EXPD

Expeditors International of Washington has been trying to push higher, and investors remain bullish on the name.

optionMONSTER's Heat Seeker tracking program detected the purchase of about 5,400 January 40 calls, most of which priced for $0.45 to $0.65. Volume was more than twice previous open interest at the strike, indicating that new positions were opened.

Those buyers have locked in a $40 entry price on the shares over the next three weeks, no matter how high the stock price goes. That will result in some nice leverage if the logistics and shipping company continues to appreciate in value.

For instance, EXPD fell marginally to $39.03 on Friday. If it climbs just 10 percent to $42.93 by expiration, those calls will roughly quintuple. The advantage of the strategy is that the calls are much cheaper than the stock, which reduces the amount of money the investor can lose if it drops. (See our Education section for more on how options can be used to manage risk.)

EXPD has mostly been weak for the last two years, having lost about 40 percent of its value between December 2010 and October 2012. But then Goldman Sachs upgraded the company to "conviction buy" from "sell," anticipating an improved air-freight market. The move came shortly after Sterne Agee made a similar recommendation.

Total option volume in EXPD was 9 times greater than average in the session, according to the Heat Seeker. Calls outnumbered puts by 28 to 1.