Most Active Options Update: 3D Systems Corporation and Peabody Energy Corporation

3D Systems Corporation (DDD) and Peabody Energy Corporation (BTU) are both charting new lows

Oct 29, 2015 at 2:46 PM
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The 20 mid-cap stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are 3-D printer manufacturer 3D Systems Corporation (NYSE:DDD) and coal concern Peabody Energy Corporation (NYSE:BTU).


DDD was last seen 5.3% lower at $10.28, and fresh off a three-year low of $10.15, after CEO Avi Reichental tendered his resignation after 12 years. A handful of analysts have chimed in, including S&P Capital IQ's Angelo Zino, who opined, "The company says it was a mutual agreement [with the board], but we believe Avi may have been pushed out, given 3D Systems' struggles of late and investor frustration over the past two years." Canaccord Genuity, meanwhile, lowered its price target to $10 "to reflect multiple depression likely during leadership transition," and said it will "remain on the sidelines ahead of next Wednesday's earnings release."

Intraday put volume is running at six times the normal pace, and the International Securities Exchange (ISE) indicates buy-to-open action at the November 10 put. By purchasing the puts to open, the buyers expect DDD to sink into single-digit territory before the close on Friday, Nov. 20, when front-month options expire.

During the past 10 weeks, however, long calls have been more dominant than usual. The equity's 50-day call/put volume ratio on the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.05 -- higher than three-quarters of all other readings from the past year. Echoing that, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.82 sits just 5 percentage points shy of a 52-week low, suggesting near-term traders have rarely been more call-biased. 

As alluded to last week, the out-of-the-money January 2016 15-strike call saw the biggest open interest influx during the last 10 sessions, with more than 4,000 contracts added. Traders who bought the calls to open are either gambling on a notable rebound north of $15 -- which has acted as a roadblock over the past couple of months -- by January options expiration, or they're hedging their short positions

In fact, short interest accounts for nearly a third of DDD's total available float. At the security's average pace of trading, it would take nearly 15 sessions to buy back these bearish bets.

Whatever the motive, today's CEO shake-up -- as well as expectations for post-earnings volatility -- has sent 3D Systems Corporation's (NYSE:DDD) 30-day at-the-money (ATM) implied volatility to an annual high of 83.4%. The equity's 30-day historical volatility stands at a slimmer 68.9%, hinting at relatively inflated premiums. Ahead of earnings, the security's near-term ATM straddle is pricing in a 15.3% swing -- more than twice DDD's average one-day post-earnings move of 6.6%, going back eight quarters.

On Tuesday, BTU sank after warning of ebbing coal demand. While the shares edged slightly higher amid yesterday's broad-market rally, the stock is resuming its decline with a vengeance today. At last check, BTU has shed 17% to sit at $14.43 -- and is just off an all-time low of $14.05 -- bringing its year-to-date loss to a steep 87.5%.

It's no surprise, then, to find option traders more bearish than usual. The equity's 10-day put/call volume ratio on the ISE, CBOE, and PHLX sits at 0.76 -- higher than nearly two-thirds of all other readings from the past year. During the past two weeks, the January 2017 5-strike put has been most popular, with open interest surging by more than 14,000 contracts.

Traders who bought the puts to open expect BTU to dramatically decline over the next year and change. The puts will move into the money if BTU sinks south of $5 -- another 65.3% plunge from current levels -- by January 2017 options expiration. Delta on the puts currently rests at negative 0.07, implying a roughly 7% chance of expiring in the money.

It's also not a shock to find short interest accounts for 33.6% of Peabody Energy Corporation's (NYSE:BTU) total available float, though the equity has once again been relegated to the short-sale restricted list today. What does stand out is the average 12-month price target of $33.38 among analysts -- more than twice BTU's current price. A flood of price-target cuts could add salt to the beleaguered stock's wounds.

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