TASER International Calls Popular Amid Sector-Wide Rally

TASER International, Inc. (TASR) is attempting to close a late-February bear gap

Digital Content Group
Mar 24, 2015 at 2:54 PM
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As we approach the final hour of trading, it looks like TASER International, Inc. (NASDAQ:TASR) is getting a halo lift from sector peer Digital Ally, Inc. (NASDAQ:DGLY). At last check, shares of TASR were up 4.2% at $25.30, and options are flying off the shelves.

Specifically, calls are running at 1.6 times the expected intraday rate, and more than tripling the number of puts on the tape. Based on the equity's 30-day at-the-money implied volatility -- up 2% to 41.5% -- there's increased demand for short-term strikes.

Along those lines, buy-to-open activity may be transpiring at the April 26 call -- which is TASR's most active option this afternoon. If this is the case, these speculators are banking on the shares toppling $26 by the close on Friday, April 17, when the newly front-month options expire. The stock hasn't ended a session north of this mark since Feb. 25, prior to an earnings-induced bear gap the following morning. As such, delta on the out-of-the-money call is just 0.42, or roughly 2-in-5.

Long calls have been popular in recent weeks among TASR options traders. The security's 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 11.78, which ranks in the 82nd percentile of its annual range. It should be noted, though, that some of these calls may have been initiated by short sellers seeking an upside hedge. After all, nearly one-quarter of the stock's float is sold short.

As alluded to, TASER International, Inc. (NASDAQ:TASR) has spent the past month attempting to recover from a late-February bear gap, but the equity is still sitting in the red on a year-to-date basis. From a longer-term vantage point, however, the stock has been strong, rallying about 34% year-over-year.

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