Short-Term Options Traders Blitz Surging 3D Systems Corporation (DDD)

3D Systems Corporation (NYSE:DDD) is higher today, thanks to General Electric Company's (NYSE:GE) newest acquisitions

by Karee Venema

Published on Sep 6, 2016 at 11:08 AM

3D Systems Corporation (NYSE:DDD) is flying high, as M&A buzz swirls throughout the sector. Specifically, news that General Electric Company (NYSE:GE) will pony up roughly $1.4 billion to purchase Sweden-based 3-D printing firm Arcam and its German-based cohort SLM Solutions is helping to lift DDD stock. At last check, shares of DDD were up 6.4% at $15.87 -- and options volume has jumped to almost three times what's typically seen at this point in the day.

By the numbers, more than 4,100 call options have changed hands on DDD, compared to about 1,650 put options. Short-term options are seeing increased demand, too, considering the stock's 30-day at-the-money implied volatility has risen 2.8% to 55.9%. In fact, all 10 of DDD's most active options expire within the next seven weeks.

Most active is the security's September 15 put, where it seems safe to assume new positions are being purchased. In other words, the put buyers expect DDD to retreat back below $15 by front-month options expiration at the close on Friday, Sept. 16.

On the other hand, the stock's September 16 call has also received notable attention, and it looks as if the majority of the action thus far has been of the buy-to-open kind. If this is the case, call buyers are betting on DDD to break out above $16 in the next two weeks. Earlier, the stock hit an intraday high of $16.17.

More broadly speaking, it's been put buyers who have been dominant in DDD's options pits in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 2.13 ranks just 2 percentage points from a 52-week peak.

Echoing this put-heavy backdrop is DDD's Schaeffer's put/call open interest ratio (SOIR) of 1.92 -- in the 82nd percentile of its annual range. In other words, speculative players are much more put-skewed than usual toward options expiring in three months or less. This heavy abundance of put open interest could help support the shares in the near term, with front-month options expiration just around the corner.

Additionally, the equity could encounter a fresh burst of buying power should short sellers call it a day. Short interest accounts for more than one-quarter of DDD's available float -- and would take more than six days to cover, at the average pace of trading.

This skepticism isn't confined to traders, either, even though the stock has nearly tripled since bottoming at a five-year low of $6.00 in late January. Currently, all but one of the 12 brokerages covering 3D Systems Corporation (NYSE:DDD) maintain a "hold" or "strong sell" rating, leaving the door wide open for a round of upgrades.

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