This morning FedEx Corporation (FDX) was upgraded to “outperform” from “market perform” by brokerage firm Morgan Keenan in anticipation the company could enjoy stronger earnings leverage as its volumes bounce back. This upgrade comes ahead of earnings, which are expected from FedEx before the open on March 18^th. Analysts are expecting per-share results of 71 cents, a vast improvement from the company’s year-ago loss of 15 cents per share. At the time Morgan Keegan issued this upgrade, FDX was trading around $86.14.

While brokerage houses such as Morgan Keegan are limited to “buy,” “hold,” and “sell,” recommendations, investors who trade with options have a broad arsenal of strategies at their disposal. Here’s a look at two of the ways options investors might trade FedEx, whether they share Morgan Keegan’s optimism or wish to trade against the grain. These are not buy-sell-hold recommendations – just potential strategies that fall into the bullish and bearish camps.

Traders who are similarly bullish on FedEx might consider a bull call spread, buying the March 70 call and selling the March 90 call, paying a net debit of $15.45 to do so. The maximum loss for this call spread is 100 percent of the debit paid; the maximum gain is $4.55, or the difference in strike prices minus the debit paid. This trade will be profitable if FDX is trading above $85.45 when these options expire in two weeks.

For those investors who feel FedEx could have some downside in its future, they might consider a split strike synthetic, which is a way to simulate the risk/reward profile of a short stock position through the use of options. An investor might buy January 2011 70-strike puts for $3.55 and sell January 2011 100-strike calls for $3.75 each, collecting a net credit of 20 cents per spread. At expiration, between the $70 and $100 levels, the investor will keep this credit as both options expire out-of-the-money. If the stock declines below $70, upside is theoretically unlimited down to the zero mark. On the flip side, losses are unlimited once FedEx crosses beyond the $100 level.

One of the attractive things about options is that they come in all shapes and sizes and can be calibrated to suit a variety of trading situations. Whether you agree or disagree with Morgan Keegan’s bullish outlook on FedEx, there may be an options strategy that could work for you.

Photo Credit: Ack Ook