TASER International, Inc. (TASR) Uptrend Could Have Shorts On Edge

Shares of TASER International, Inc. (NASDAQ:TASR) have added nearly 44% in 2016, and traders have been betting on -- or hedging against -- more upside

Dec 29, 2016 at 10:26 AM
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Shares of TASER International, Inc. (NASDAQ:TASR) are trading 1.3% higher at $24.89 on news the company has received -- and will begin to ship -- a number of big orders for its digital equipment, which includes body cameras. Today's positive price action is nothing new for TASR stock, given its impressive 44% year-to-date gain. And while it appears options traders have taken the bullish route of late, there could be an ulterior motive to the recent rush toward long calls.

Taking a quick step back, call buyers have been busy in TASR's options pits recently. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, the security's top-heavy 10-day call/put volume ratio of 10.13 ranks just 10 percentage points from a 52-week peak. Simply stated, calls have been bought to open over puts at a near-annual-high clip.

Given TASR's impressive technical run in 2016, it's likely some of this activity is of the traditional bullish variety. However, considering a whopping 21% of the stock's float is sold short, it's also possible short sellers have been purchasing calls to hedge their bearish bets against any upside risk.

Regardless, now appears to be an affordable time to purchase premium on TASR's near-term options, considering the relatively low volatility expectations that are currently priced in. Specifically, the security's Schaeffer's Volatility Index (SVI) of 36% ranks in the 15th annual percentile, while its 30-day at-the-money implied volatility of 35.2% arrives below 84% of all comparable readings taken in the past year.

From a contrarian perspective, the stock could be in a position to continue its uptrend, too. Should TASER International, Inc. (NASDAQ:TASR) extend its positive momentum, unhedged shorts could be forced to capitulate -- which may translate into a fresh burst of buying power for the shares. At TASR's average daily pace of trading, it would take more than nine sessions to cover these shorted shares -- ample fuel for a short-covering rally.

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