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Option Brief: Last night's report from Wohlers Associates -- which showed a huge increase in 2013 sales of 3D printers capable of manufacturing metal parts -- has been a boon to 3D Systems Corporation (NYSE:DDD) and its sector peers. Specifically, DDD is sitting on an 8.7% lead this afternoon at $55.22. As such, calls are trading at an 84% mark-up to the typical intraday rate, and nearly doubling the number of puts on the tape.
DDD's most active option is the weekly 5/23 55-strike call, where more than 2,500 contracts have traded -- the majority at the ask price, suggesting they were bought. What's more, volume outstrips open interest at the strike, conveying the creation of new bullish positions.
These traders are either banking on a rally in the shares through tomorrow's close, or are protecting against one. Specifically, "vanilla" buyers will profit if DDD has toppled breakeven of $55.27 (strike plus the volume-weighted average price of $0.27) by week's end -- when the options expire -- with theoretically unlimited profit potential north of that mark. Conversely, since 30.5% of the equity's float is sold short, it's possible short sellers may have scooped up the long calls as a short-term hedge against continued gains. No matter the motive, the option buyers' maximum risk is limited to the initial premium paid.
On the charts, since hitting a year-to-date low of $43.35 late last month, the shares have tacked on more than 27%. If 3D Systems Corporation (NYSE:DDD) can maintain this positive momentum, the short sellers may be forced to cover their shares, intensifying buying pressure on the equity.