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Option Brief: 3D Systems Corporation (NYSE:DDD) will take its turn in the earnings confessional before tomorrow's open, and option players are showing a bias toward puts ahead of the scheduled event. At last check, roughly 20,000 puts had changed hands, versus about 12,000 calls. Diving deeper reveals that a number of speculators are betting on an earnings miss for the printing solutions specialist.
One of the more active positions in DDD's options pits today is the weekly 2/28 75-strike put, where roughly three-quarters of the 1,884 contracts traded have done so on the ask side. Implied volatility has surged 60.9 percentage points, pointing to the initiation of a fresh batch of bearish bets.
With DDD lingering near $74.56, these puts are currently in the money. All other factors being equal, though, breakeven for today's put buyers (at expiration tomorrow night) is $72.39, which is the strike price minus the volume-weighted average price of $2.61. The initial cash outlay also represents the maximum potential risk on the play, should DDD take a post-earnings pop.
This bearish bias is understandable, given DDD's recent technical showing. Although the equity has roughly doubled in value year-over-year, it is down about 20% in 2014. In today's session, the security is extending this recent downtrend, and has lost about 1.8%, despite an early morning price-target hike to $84 from $73 at Brean Capital. Earlier this week, the stock received some not-so-upbeat attention from a different brokerage firm.
Unfortunately for today's put buyers, history is not on their side. Specifically, 3D Systems Corporation (NYSE:DDD) reported earnings that matched or exceeded analysts' estimates in six of the past seven quarters. Also in the past seven quarters, the stock has tacked on an average of 2% and 8.6% in the subsequent day and week, respectively. For the company's fourth quarter, Wall Street is calling for a per-share profit of 19 cents -- a 38.5% drop from its year-ago earnings.