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by Terrence on July 5, 2012

This Trade Was Closed July 18, 2012

Closed this trade today for a profit at 3.60 per contract. Original entry was 1.70

Original Trade Post:

The only stocks I have interest in right now are the ones with strong EPS growth. Ultimately, those are the ones that are showing strong sales and strong cost controls. Those are the cream of the crop. I really like 2 companies in the 3d printing space – SSYS and DDD. I already own DDD and today bought some July calls in SSYS. Think or swim has a nice new feature that I noticed today, which shows some very interesting data points. Taking a close look at the options activity today in SSYS, notice the calls to puts ratio (1180:145). Strong volume in the calls today. Next look at the % of volume traded on the bid, the ask or in between the ask and bid, and 89% of volume was on the ask or in between the ask an bid. Only 11% traded in the bid. This indicates to me that traders were anxious for these trades to fill which is a sign of strong demand. Then take a look at the “Delta between” data. 77% of the call volume has been in options with a delta between 21 and 40%. That’s a large proportion of OTM calls that were bought compared to ITM calls. Then take a look at the most active call option today – it’s the near month (July) $55 (OTM) call. Strong signs of some very bullish speculation. I went long this call @ 1.70 today. It’s trading at 1.95 right now. It expires in 15 days, and I need price to at least reach $56.70 to break even by expiration

Looking at the stock chart, SSYS is pushing the upper range of its consolidation envelope. A break over $55 will be a fresh move to higher highs.

Some positive news was out last week about SSYS involved in a joint initiative with the DOE, which is some good fundamental news:
“03:20 PM EDT, 06/29/2012 (MidnightTrader) — Stratasys, Inc. (SSYS) is taking part in a joint initiative with the U.S. Department of Energy (DOE) at Oak Ridge National Laboratory to develop fused deposition modeling additive manufacturing for production use.”

Trade Details

The Ticker: SSYS
Target Price: 3.60 per share

The Trade
Buy to Open Jul 2012 55 Calls at 1.70 or better

Trade Opened: July 5, 2012
Trade Closed: July 18, 2012

Chart courtesy Finviz. Click to open larger.

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Waychel Yu

Isn’t that kind of risky to invest in only two stocks, especially when they are both in the same industry? I bought DDD a couple month back and decided to sell it when DDD completed their secondary offering, selling $100M in shares at $27, well below the market price of $31.91. Immediately, the price dropped down to $28.78. Since I was afraid that 3D system will pull another stun like that again, I sold it. I don’t understand why would they do that to their stock investors. This increased their beta value and it certainly kept me away in this volatile climate.
- Terrence
  
  I also held DDD when the secondary dropped the share price, but did you notice the very next day, traders were buying that puppy on the dip. I look at share offerings as a company’s way to continue either pay off debts or re-invest in the business. In either case, they are adding to long-term shareholder value, and I think it’s best to view these things as one time as events that won’t affect the longer-term trend of a chart. As they say, the Trend is your friend, and I think you’ll have a hard time finding a stock with as pretty of an 8 month uptrend as DDD. I agree from a diversification standpoint that you should not risk more than what your personal max risk threshold is. Usually for me that is 5%. However, I think when it makes sense, and if you have a 1+ year time horizon, you can double down on something that you believe in that has a healthy chart, or let profits ride if the position has swelled beyond your position risk sizing
Hemadri Singh

I recently saw an ad in a magazine that I subscribe to about bench-top 3-d printers. Although I struggle to understand what practical use an individual has for these it is fascinating to see this emerge. Is this the next “fax machine”?

I am glad you posted this… I never would have thought to look at this industry.
- Terrchan
  
  There was an article in the economist back around April. Check it out. There are more applications of this tech than most would think, and maybe the point of it is that there is far more potential than we can think of at this moment. That imaginative, intangible quality is the sign of an innovation without borders. I think of AAPL before it released the iPhone and iPad and recall how I had no idea what they would look like or how to use them, and the anticipation that created, and the rest is history.

Speculative call option activity in SSYS

Speculative call option activity in SSYS

Original Trade Post:

Trade Details