Bearish Betting Hits Fever Pitch On 3M Co (MMM)

3M Co put buying is at peak levels

by Karee Venema

Published on Dec 16, 2014 at 1:27 PM
Updated on Apr 20, 2015 at 5:32 PM

It's a big day for blue chips, and 3M Co (NYSE:MMM) is no exception. The stock is up 2.1% to $160.09, after the company offered an upbeat outlook for 2015 sales growth and boosted its dividend by 20%. However, today's surge is likely stinging option traders, who have been upping the bearish ante on MMM in recent weeks.

Since the start of the month, in fact, MMM's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio has jumped to 4.51 from 0.88. What's more, the current ratio ranks above all other readings taken in the past year, meanings puts have been bought to open over calls at an annual-high clip.

On the charts, though, MMM has been making a run higher since taking a sharp bounce off its 320-day moving average in mid-October, tacking on nearly 23%. Plus, the equity hit a fresh record high of $162.92 as recently as Dec. 4. As such, it's possible some of this put buying is attributable to shareholders protecting paper profits against an unexpected pullback.

Daily Chart of MMM Since October 2014 With 320-Day Moving Average

Regardless, MMM's short-term options are rather expensive at the moment. The equity's Schaeffer's Volatility Index (SVI) of 21% ranks in the 71st annual percentile, suggesting 3M Co's (NYSE:MMM) near-term options are pricing in lofty volatility expectations.


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