Publicly traded companies in the trucking industry have had a pretty smooth ride over the past year. Cargo tonnage is way up compared to the recession lows, and an improving U.S. economy has helped push earnings in the space higher. Investors who hold shares in some of the biggest trucking companies have been rewarded handsomely, particularly during the first quarter. The question is whether the sector offers enough opportunity for options trading investors.
For example, JB Hunt (NASDAQ: JBHT) has risen 8.8% over the past three months, while Old Dominion Freight Line (NASDAQ: ODFL) shares have pulled up a 9.25% gain. Werner Enterprises (NASDAQ: WERN) put the pedal to the metal even harder, speeding to a 14.9% gain by the end of the 2011 inaugural quarter.
Despite this bullish move, the sector at large could be headed for a traffic jam. (See “5 Big Roadblocks for Trucking Stocks,” March 31.) Persistently high fuel prices could begin to cut into these companies’ bottom lines, and the specter of inflation could put pressure on already thin margins. Then there’s the new federal Hours of Service (HOS) rules that shorten a driver’s workday, and that will further raise trucking company costs and potentially delay shipments.
All of these factors could mean a flat tire for the truckers, and this downside can mean potential profits for options traders. Unfortunately, the trucking sector isn’t replete with a lot of high-volume options contract action. While several stocks offer options there isn’t a huge amount of open interest. Still, there are a couple of good trades out there with potential to speed to greatness.
The first is JB Hunt, and here I like the JBHT Aug 2011 45 Put. The stock closed down .57 to $44.85 on April 1, making this put slightly in-the-money. Check the option chain for the latest prices.
The second trucking stock option trade worth checking out is in Old Dominion Freight Line, and it’s the ODFL Jul 2011 35 Put. This contract now is at-the-money with the stock closing at $35.27 on April 1. There’s not much volume on this contract just yet, but early adopters in this contract could find some big gains if there’s a slowdown in the trucking sector.
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