Large blocks of short-term calls appeared in the former high-flying tech name minutes into the session. The Weekly 55 calls expiring this Friday led the flow, with the initial blocks fetching 70 cents to $1.33, according to OptionMonster's scanners.
These long calls lock in the price where the three-dimensional printing stock can be purchased, letting investors cheaply position for a rally. They can also generate significant leverage, which is exactly what happened Monday.
3D's stock was up 3% when we posted our initial alert and continued higher throughout the session, ultimately closing with a 7.29% gain to $57.23. But that appreciation was insignificant compared with the calls, which more than doubled to $2.60 by the closing bell.
The stock rallied about 800% between the start of 2012 and the beginning of this year, only to see half its value erased when the Nasdaq pulled back in the spring. Short interest represents about one-third of the float, which could trigger buying in the name.
More than 7,000 of the Weekly 55s were bought by the end of the session, dwarfing the previous open interest of 1,173 contracts and therefore representing new positions. Some 4,100 Weekly 60 calls were also bought, mostly for 15 cents to 35 cents.
Overall option volume in the name was six times average amounts, with calls accounting for a bullish 75% of the total.
Russell has no positions in DDD.