The multinational industrial conglomerate 3M (NYSE: MMM) is emblematic of investor frustration. Over the past five years, MMM stock has lost 16% of its equity value. It’s not off to a great start in 2026, either, with shares down 11%. Multiple financial outlets specializing in technical analysis are basically begging off the once proud blue-chip giant. Yet for short-term options traders, an opportunity may have just flashed in the charts.
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From a fundamental perspective, some might argue that there might be some value to be extracted from MMM stock. Last month, 3M delivered its first-quarter earnings report, with earnings per share of $2.14 exceeding analysts’ estimate of $2 (while also beating the year-ago quarter’s $1.88). Unfortunately, revenue missed slightly, coming in at $6 billion, inches shy of the $6.01 billion estimate.
Still, the print came during a rough period in the economy, not to mention the broader geopolitical flashpoint of the Iran conflict. So, the thinking may go, in a bit more fortuitous environment, MMM stock could be a steal. Indeed, the smart money seems to be at least entertaining this notion.
Volatility Skew Provides an Intriguing Take on MMM Stock
To be quite blunt, none of the options screeners offer a probabilistic ontology. For example, rookie retail traders may assume that high call volume in an unusual options screener means “bullish.” In fact, that one reading could mean a lot of things. It could be a covered call by a large fund selling the options against their long position to generate income. Or it could be someone who was long that has decided to close out their position.
Without a vector or signal of intent, it’s risky to jump in on a trade based on an inference on options data. That said, I do like volatility skew because it shows the snapshot of positional structuring of trades. In other words, the screener identifies how the smart money — who is the most common participant in options — is approaching the target security.
In the case of MMM stock, the current intent of sophisticated market participants isn’t as dreary as you might expect. Rather, I’d call the overall sentiment pensive: they’re seeking downside protection, but they also don’t want to be caught sleeping in case 3M rips higher.
Looking at the June 18 expiration date, the volatility skew — which reveals implied volatility (IV) across the strike price spectrum of a given options chain — features a broad smile. Technically, IV is flat around the strikes closest to the spot price on both the bullish and bearish axes. However, as the strike price range extends further away from spot on both ends, the skew rises.
What does that mean in basic terms? Think of volatility skew as an insurance market. As the underlying IV rises for certain strike prices, this dynamic indicates that traders are paying for either protection or exposure. With the skew smiling higher on the left side of the spot (than compared to the right side of the spot), the overall bias is one toward downside protection.
However, IV is also rather robust for far out-the-money (OTM) calls. Effectively, the smart money is pricing MMM stock for upside convexity — and I’ll argue that this isn’t a purely spurious wager.
As I said earlier, volatility skew doesn’t provide information regarding probabilities. Just because you pay a higher premium for auto insurance doesn’t mean that an auto accident is more likely. It’s just that you’ll probably pay more if you happen to get into an incident without coverage.
With MMM stock, the smart money is playing both sides of the field, hinting that a bullish bet isn’t entirely irrational.
Using an Inductive Model to Trade 3M Stock
To move beyond structural observations into an actionable trade, we need to understand how 3M stock is likely to move over the next several weeks. However, we can’t just extract this probability in the abstract. We need to identify what behavioral state MMM stock is currently in and how this specific signal tends to respond in the future.
Obviously, none of us has a crystal ball — and as far as I know, it’s impossible to move beyond our present state and return to it. So, how the heck do we “know” what MMM stock will do? That’s where we turn to induction.
Another term for pattern recognition, induction relies on the uniformity of nature — essentially, that the future will resemble the past. It must be stated here that induction isn’t perfect. Just because you observe a particular pattern play out from a specific signal does not guarantee that the pattern from today will pan out as observed.
Here’s where the philosophical theory comes in, though. If we observe a high enough volume of similar patterns play out, that gives us a measure of confidence. Besides, without the risk, the reward will be minimal.
That’s the heart of my Markovian simulation. I take the specific signal of the current state (which I define as the last 10 weeks) and then observe what tends to happen over the next state (10-week period).
Putting Induction into Action
Using a dataset from January 2019, when MMM stock is held for a 10-week-long position, you are likely to see an expectancy ratio of 49.9%. Out of 363 rolling 10-week sequences, 181 popped above the starting price. That’s not great because you’re saying that 3M stock is a coin toss for traders. Further, the returns are modest. Over the next 10 weeks, the forward distribution would likely range between $141.50 and $144 (assuming a starting price of $142.50).
Nobody likes coin tosses because you are basically guaranteed to lose money (due to transactional losses compounding). However, we’re not interested in trading MMM stock as a performance aggregate. Instead, we’re trading a specific signal.
In the last 10 weeks, 3M stock printed only three up weeks, leading to an overall downward slope. Under this 3-7-D sequence, the forward distribution tends to shift positively, with outcomes ranging between $142 and $152. Granted, it’s not amazing but there is a noticeable swing from the baseline.
Subsequently, I’m intrigued by the 145/150 bull call spread expiring June 18. If MMM stock rises through the $150 strike at expiration, the maximum payout would be roughly 142%. Further, the breakeven price comes in at $147.07, which adds some probabilistic safety margin for the trade.
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