Calls Hot as TASER International, Inc. (TASR) Soars

TASER International, Inc. calls are trading at eight times the intraday average

Nov 26, 2014 at 12:13 PM
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TASER International, Inc. (NASDAQ:TASR) is up 6.6% -- and earlier hit a nine-year high of $22.35 -- after North Carolina's Winston-Salem Police Department upped its order with the company. Option traders are responding in kind, with calls trading at eight times the intraday average, and outpacing puts by a 9-to-1 ratio.

Most active is the equity's December 23 call, where 2,627 contracts are on the tape. The majority of these have changed hands at the ask price, implied volatility is up 2 percentage points, and volume outstrips open interest, making it safe to assume new positions are being purchased.

The volume-weighted average price (VWAP) for the calls is $0.55, making at-expiration breakeven $23.55 (strike plus VWAP) -- territory not charted by TASR since January 2005. Gains will accrue north of here, while losses are capped at the initial premium paid, should the stock settle south of the strike at expiration.

However, with a significant portion of the equity's float dedicated to short interest, the activity at this out-of-the-money strike could be at the hands of shorts hedging against any additional upside. Regardless of the reason, premium on the equity's front-month options is relatively inexpensive at the moment. Specifically, TASER International, Inc.'s (NASDAQ:TASR) Schaeffer's Volatility Index (SVI) of 47% ranks lower than 70% of similar readings taken in the past year.

 

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