3M Put Options Hot as Dow Stock Slumps

MMM is the worst stock in the Dow this morning

by Karee Venema

    Published on Apr 25, 2019 at 10:19 AM
    Updated on Apr 25, 2019 at 10:20 AM

    The shares of 3M Co (NYSE:MMM) are slumping today, after the consumer products giant -- whose products include Post-it and Scotch Tape -- reported first-quarter adjusted profit of $2.23 per share on $7.86 billion in revenue, less than analysts were expecting. The company also lowered its 2019 earnings forecast, and said it's cutting 2,000 jobs worldwide as it shifts to four operating units from five.

    At last check, MMM stock is off 10% to trade at $197.19 -- dragging the Dow down with it -- sinking back below the round $200 mark and its 120-day moving average for the first time since early March. The stock has also moved south of the $198 level, which marks a 50% Fibonacci retracement of its rally off its late-December low at $176.87 to yesterday's annual high of $219.75.

    Heading into today's trading, the Dow stock was boasting a nearly 15% lead for 2019, trading in a channel of higher highs and lows. Options traders were positioned for a post-earnings pullback, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MMM's 10-day put/call volume ratio of 2.81 ranks in the 97th annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip.

    This put-heavy trading is continuing today, with 21,000 puts on the tape so far, compared to fewer than 7,326 calls. Total options volume is running at 15 times the expected intraday pace, and tracking in the 100th annual percentile. Most active is the weekly 4/26 195-strike put, where new positions are being initiated.

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