Reflecting on my DDD options trades. What I did right. What I did wrong. What I am going to do next.
DDD is the symbol for 3D Systems Corp. It provides comprehensive 3D printing and digital manufacturing solutions, including 3D printers for plastics and metals, materials, software, on-demand manufacturing services, and digital design tools. Its key end markets include healthcare, dental, aerospace, automotive and durable goods. It generates the majority of revenues from the United States.
I believe in 3D printing and additive manufacturing because it is sustainable and reduce waste.
I started trading DDD stock options before I know how to do proper research on the stock. I did look at some stock analysis and reports but I did not know what I am looking at.
DDD Options: Selling Put Options
I decided that I should just start by selling some PUT options. I thought it is a good way to earn some income. If my option is exercised, I get to purchase the stock at a lower price.
25 Jun 2021 – Sold two put options with strike price $40 expiring 20 Aug 2021 at a premium of $1,140. Assigned. Profit: $1,140
I was assigned on my first put option at $40. My “investment” is $8000.
I continued to sell 2 more put options. I shouldn’t have but I was attracted by the premiums. Mental note to not do that again.
21 Jul 2021 – Sold one put option with strike price $35 expiring 19 Nov 2021 at a premium of $1030. Closed on 12 Aug for $640. Profit: $390
3 Dec 2021 – Sold one put option with strike price $20 expiring 7 Jan 2022 at a premium of $120. Closed on 23 Dec for $40. Profit: $80
I collected a total of $1,610 making my actual purchase price of DDD stock ($8000-$1,610)/200 = $31.95
Selling Call Options
I was assigned 200 shares at a share price of $40. I promptly started selling covered call options.
24 Aug 2021 – Sold two call options with strike $36 expiring 1 Oct 2021 at a premium of $190. Expired. Profit: $190
11 Oct 2021 – Sold two call options with strike $34 expiring 26 Nov 2021 at a premium of $160. Closed on 12 Nov for $20. Profit: $140
My call options collected at the end of 2021 is $330. In December, DDD stock price dropped significantly, making it a challenge to select strike prices.
This motivated me to learn how to manage the probability of my trades using delta.
23 Feb 2022 – Sold two call options with strike $22 expiring 18 Mar 2022 at a premium of $76. Closed on 4 Mar for $6. Profit: $57.64
Total call options income is $387.64
8 Mar 2022 – Sold two call options with strike $19 expiring 14 Apr 2022 at premium of $60. Expired. Profit: $56.61
Evaluating DDD
At the beginning of 2022, I attended a course called Options Millionaire Intensive (affiliate link). OMI is a 3-day live / virtual bootcamp. I learnt some interesting investing concepts and strategies. One of them is a checklist for evaluating whether a company is good.
- Operating cashflow (OCF) of a good company should be consistently positive. A bonus if it is growing.
- Net profit margin should be positive. 10% and more to be considered good.
- Interest coverage ratio should be positive. The larger the number the better. Nil is also good. It means the company has no loans.
- The current year Price/Earning ratio (PE) should be lower than the 5-yr PE
- The current year Earning Per Share (EPS) should be higher than the 5-yr EPS
- The Value line should be higher than the current share price. This means that the company shares could be trading at a discount.
Applying the OMI Checklist to DDD
- DDD’s operating cashflow is positive and is growing. 5-year OCF = 22.09 million TTM OCF = 75.18 million
- DDD’s net profit margin % has been negative for the last couple of years. It turned positive in the last 12 months and the amount is large enough to turn the 5-year average positive too. I hope this is sustainable and not a one-year fluke. 5-year profit margin % = 1.288% TTM % = 48.39%
- DDD has sufficient money to service their loan interest.
- DDD’s 5-year P/E = 8.17 , TTM P/E = 6.93
- DDD’s 5-year EPS = (0.44) TTM EPS = 2.54
- The value line is 17 x 2.54 = $20.75. The value line is currently higher than share price of $16.26. A good sign.
DDD stock has healthy operating cashflow but not a healthy profit margin. I read that other investors are concerned about their expenses. I hope management will be responsible and keep expenses down.
I think DDD stock can hold for the mid term. In the meantime, I will continue to try and sell covered calls.
- Number of shares: 200
- Total Cost: $8,000 – $2,030.50 = $5,969.50
- Cost per share: $29.85
