Schaeffer's Trading Floor Blog

Stocks to Watch Friday: 3M Co, Smith & Wesson Holding Corp, and JDS Uniphase Corp

Analyzing MMM, SWHC, and JDSU ahead of tomorrow's trading

by 5/1/2014 4:49 PM
Stocks quoted in this article:

Momentum names that made notable moves on Thursday and could continue to do so into Friday's session include diversified tech firm 3M Co (NYSE:MMM), firearms producer Smith & Wesson Holding Corp (NASDAQ:SWHC), and communications technology maven JDS Uniphase Corp (NASDAQ:JDSU). Here is a quick look at these stocks ahead of tomorrow's opening bell.


MMM tagged a fresh record high of $141.49 today, before finishing 1.2% higher at $140.81. Accordingly, in the options pits, calls traded at a roughly 10-fold mark-up to their intraday average -- easily outpacing puts -- and the stock's 30-day at-the-money implied volatility (IV) rose by 6.4% to 13.8%. Thursday's preference for calls over puts is business as usual for MMM, which boasts a Schaeffer's put/call open interest ratio (SOIR) of 0.85. This SOIR is just 2 percentage points from a 52-week low, indicating a near-extreme preference for short-term calls over puts.

Smith & Wesson Holding Corp (NASDAQ:SWHC)

Also faring well on the charts was SWHC, which raced out to a new six-year high of $15.93, and settled slightly south of that mark at $15.89. Not surprisingly, call volume more than tripled put volume, led by apparent buying activity at the in-the-money June 15 strike. In recent months, however, put buyers have been more active, as Smith & Wesson's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.54 ranks in the bearish 92nd percentile of its annual range. Similarly, about one-third of the stock's float is sold short, which would take more than two weeks to cover, at its average daily trading volume. If SWHC can maintain its positive momentum, an exodus of option bears and/or future short-covering activity could bolster the equity's upward momentum.

JDS Uniphase Corp (NASDAQ:JDSU)

Finally, JDSU came up well short of analysts' top- and bottom-line estimates during its appearance in the earnings confessional last night. Subsequently, the shares spiraled to a 14.2% loss today to finish at $10.87, after earlier touching an annual low of $10.53. This landed the stock on the short-sale restricted list, and prompted traders to rush into JDS Uniphase's options pits, where overall volume finished at more than 12 times the daily average. Taking a step back, option bulls have been flocking toward JDSU, as evidenced by its 50-day ISE/CBOE/PHLX call/put volume ratio of 3.82 -- which is higher than more than two-thirds of comparable readings from the previous year. However, if the stock extends its recent downtrend, an unwinding of those bullish positions -- particularly at out-of-the-money strikes -- could intensify the selling pressure.

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