3D Systems Corporation (DDD): A Golden Opportunity for Option Bulls

3D Systems Corporation (NYSE:DDD) has been running up the charts, but plenty of skeptics have yet to climb on board

Oct 5, 2016 at 11:02 AM
facebook X logo linkedin

Contrarian traders are constantly looking for stocks with an edge, whether that be an outperforming equity that's surrounded by skepticism both in and out of the options arena -- or, conversely, an underperformer that Wall Street has yet to give up on. Here at Schaeffer's, our three-tiered methodology -- known as Expectational Analysis® -- does just that. Recently, our Senior Quantitative Analyst Rocky White ran the numbers, and 3-D printing stock 3D Systems Corporation (NYSE:DDD) stood out among a number of stocks as a potential contrarian play for bullish traders.

Technically, DDD stock has turned in an exceptional performance in 2016, boasting a nearly 109% year-to-date advance, last seen at $18.13. More recently, the equity has outperformed the broader S&P 500 Index (SPX) by 21.7 percentage points over the past three months. Amid this uptrend, the shares have filled their early May bear gap -- suggesting a potential level of support has been formed in the $17.70-$18.00 region.

DDD daily chart october 5

Nevertheless, skepticism is steep toward the outperformer -- which could create tailwinds for DDD down the road. In the options arena, the stock's top-heavy 10-day call/put volume ratio of 2.09 at International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks just 9 percentage points from a 52-week peak. In other words, puts have been bought to open over calls at a near-annual-high clip in recent weeks.

Echoing this put-skewed bias is DDD's Schaeffer's put/call open interest ratio (SOIR) of 2.19. Not only does this show that puts more than double calls among options set to expire in three months or less, but it rests higher than 94% of all comparable readings taken in the past year. In other words, short-term speculators have rarely been as put-heavy toward DDD as they are now. This lofty accumulation of puts could provide a near-term foothold for the security, as the hedges related to these bets unwind.

This glass-half-empty approach has spilled outside of the options arena, as well. Although short interest declined slightly in the most recent reporting period, it still accounts for a whopping 25% of DDD's available float. Considering it would take nearly two weeks to cover these shorted shares -- at the stock's average pace of trading -- a continued capitulation from bearish bettors could translate into a fresh burst of buying power.

Additionally, DDD seems ripe for a well-deserved round of bullish brokerage attention. Currently, 10 of 11 covering analysts maintain a "hold" or "strong sell" suggestion, while the average 12-month price target of $14.88 stands at a nearly 18% discount to the stock's present price. Should DDD continue to outperform, upgrades and/or price-target hikes could help fuel the equity's fire.

Now appears to be a prime time for premium buyers to strike, too. For starters, the stock's Schaeffer's Volatility Index (SVI) of 47% ranks in the 4th annual percentile, meaning low volatility expectations are priced into DDD's near-term options. Plus, 3D Systems Corporation's (NYSE:DDD) Schaeffer's Volatility Scorecard (SVS) is docked at 87, suggesting the options market has historically underpriced DDD's ability to make big moves on the charts over the past year -- an advantage to options buyers.

Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI