3M Stock Pops on Potential $5.5 Billion Settlement

3M allegedly sold defective combat earplugs to the U.S. military

The shares of Dow member 3M Co (NYSE:MMM) are up 5.7% at $104.58 at last check, following news the industrial giant will settle more than 300,000 lawsuits pertaining to its earplugs. The company allegedly sold defective combat earplugs to the U.S. military, and the tentative settlement will amount to over $5.5 billion.

Today’s pop is likely due to the fact that the settlement skirts the possibility of even larger liability. MMM cleared the $102 level as well as its 50-day moving average, both of which have enacted pressured since mid-August. Over the last 12 months, 3M stock is down more than 23%.

Coming into today, analysts were firmly bearish toward the security, with all but one of 14 in coverage carrying a tepid “hold” or worse rating. Conversely, options traders are optimistic, per MMM’s 50-day call/put volume ratio of 1.96 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that ranks higher than 99% of readings from the past year.

Those looking to weigh on 3M stock’s next moves should consider options. The security’s Schaeffer’s Volatility Index (SVI) of 21% sits higher than just 9% of readings from the past 12 months. This implies these traders are pricing in low volatility expectations. 

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