3M Stock Breaks Above Key Level on Heels of Bull Note

Calls have been popular among 3M options traders

by Emma Duncan

Published on Dec 23, 2019 at 10:12 AM

Manufacturing name 3M Co (NYSE:MMM) is enjoying a 0.9% lift this morning -- a reaction to the surprise bull note out of J.P. Morgan Securities. The firm upgraded MMM to "neutral" from "underweight," and hiked its price target to $150 from $143, though this still represents a 14% downside to Friday's close. Despite being in the midst of a lawsuit regarding water contamination with its polyfluoroalkyl substances (PFAS), J.P. Morgan Securities sees MMM as stable, with potential growth stemming from its electronic business. Coming into today, all 12 covering analysts sport a "hold" or "strong sell" recommendation.

Now trading just above the $177 mark, 3M stock is extending its breakout above the $172 ceiling, while also easing up on its 7% year-to-date deficit. The 50-day moving average has emerged as a cushion of support for the shares of late, capturing multiple pullbacks since mid-October.

Data at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a preference of calls over puts, per the equity's 10-day call/put volume ratio of 2.03, and ranks it in the 85th percentile of its annual range. In simpler terms, calls have been purchased over puts at a faster-than-usual clip. 

Short-term options premiums on 3M stock look relatively cheap at the moment, based on the equity's Schaeffer’s Volatility Index (SVI) of 18%, which ranks in the 14th percentile of its annual range, meaning those looking to speculate on MMM with options, should do so now. Plus, 3M's Schaeffer's Volatility Scorecard (SVS) sits at 80 (out of 100), indicating the equity has tended to exceed option trader's volatility expectations during the past year. 


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