On CNBC's "Options Action", Dan Nathan spoke about a contrarian trade in FedEx Corporation FDX.
The stock is down around 21 percent since Dec. 3 and the options market is implying a 5.5 percent move in either direction next week when the company is due to report earnings. Nathan believes a lot of bad news is already priced in and he thinks that the stock might bounce.
Nathan wants to sell the December 195 call for $1.50 and buy the February 195 call for $6. The total cost for the trade is $4.50, which sets the breakeven for the February call at $199.50. With this trade, Nathan is betting that the stock is going to stay below $195 at the December expiration, but after that, it has to jump above $199.50 for the trade to make money.
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