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Optimism Grows Toward 3M

by Jocelynn Drake 2/13/2007 12:16 PM

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This morning, my colleague Beth reported that 3M Company (MMM: sentiment, chart, options) not only boosted its dividend by 4.3 percent, but the blue-chip firm also announced a $7 billion stock buyback program. At last check, the shares gapped higher on the news and are currently up more than two percent.

In the options trading pits, the most-active February option is currently the 75 call, as nearly 3,400 contracts have crossed the tape on open interest of 7,300 contracts. The volume has been dominated by several small blocks throughout the morning. Meanwhile, it looks like a ghost town over on the puts side, as the most-active February strike is still the 75 strike, but only 780 contracts have traded so far on open interest of 8,640 contracts.

In fact, calls have been a growing preference among investors. The stock's Schaeffer's put/call open interest ratio (SOIR) has steadily declined from an annual peak of 1.59 on January 22 to its current perch of 0.99, in the 38th percentile. During this time frame, call open interest among options with less than three months until expiration has swelled by more than 31,400 contracts, while put open interest increased by just 15,000 contracts.

Technically speaking, the shares have actually lost close to three percent since January 22. This move is not exactly something that is reassuring when so many investors are becoming bullish. Furthermore, the equity has been steadily guided lower by its 10-day and 20-day moving averages since late November. Even today's rally has been halted by the security's 20-day moving average.

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