3D Systems Corporation (NYSE:DDD) was once a market darling during the 3D printing rally of 2012-13. In that period it rallied from $10 to over $97 as investors got caught up in the excitement of what this amazing new technology could offer.
Since the high in late 2013, it came crashing back down to earth and in 2016 traded as low as $6.
The stock has since recovered and is now trading around $16.70 having risen 178% from the 2016 low.
With the stock now holding above the 50 and 200 day moving averages, perhaps it is time for the stock to make a new explosive move higher.
One trading opportunity for those traders with a bullish bias is a Bull Put Spread. Traders willing to bet that the stock will stay above $16, could use the $16 strike as the short put and the $15 strike as the long put.
As of Monday’s close, this trade offered a roughly 55% return on risk over the next 40 calendar days when using the March 17th expiry.
The recent pullback in January held the $16 level and that may provide support going forward.
The maximum profit on the trade would be $35 per contract with a maximum risk of $65. The spread would achieve the maximum 55% profit if 3D Systems Corporation (NYSE:DDD) closes above $16 on March 17th in which case the entire spread would expire worthless allowing the premium seller to keep the $35 option premium.
The maximum loss would occur if DDD closes below $15 on March 17th which would see the premium seller lose $65 on the trade.
The breakeven point for the Bull Put Spread is $15.65 which is calculated as $16 less the $0.35 option premium per contract. Keep in mind that due to the bid-ask spread, you may not be able to get filled at these prices.
Looking at the chart, 3D Systems Corporation (NYSE:DDD) is currently trading above the 50 and 200 day moving averages which is a bullish sign. The 50 day moving average is above the 200 day moving average which is also bullish.
The RSI indicator is at 57 which is neutral territory.
Volume has been very strong during the recent rally which is another good sign for the stock.
Options trading involves risk and is not suitable for some investors. Check with your financial advisor before making any investment decisions.
Disclosure: I do not currently have any positions in DDD
About the author: Gavin has a Masters in Applied Finance and Investment. He specializes in income trading using options, is very conservative in his style and believes patience in waiting for the best setups is the key to successful trading. He likes to focus on short volatility strategies. Gavin has written 5 books on options trading, 3 of which were bestsellers. You can read more from Gavin at Options Trading IQ.