Monday, December 28, 2009

Taser (TASR) - Call Accumulater

TASR is trading ~4.32. You can see the LIVEVOL™ Pro Summary below.

TASR averages 502 option contracts traded a day - in the first hour it has traded over twice that (1,059). All but 12 of those contracts have been calls. The Company Tab snapshot is included below (click the image to enlarge).

The Options Tab snap below (click to enlarge) demonstrates that the calls traded are the Feb 5 and Feb 7.5 kind. The day's largest trades snap below illustrates that these were purchases. Note the OI - the Feb 7.5 calls are all opening order purchases (zero OI) and the Feb 5 calls traded more than twice OI. A deeper analysis of the Feb 5 calls shows that the existing 255 OI were also purchases, so all of these trades are opening order purchases.

Taking a further look at the order flow in TASR over the last month indicates a possible accumulation of OTM (out of the money) calls. The Level II pop up window for the Mar 5 calls and the Jan 2011 7.5 calls illustrates the OI charts. Both are increasing recently (and these are purchases for both lines).

In summary, including today there have been opening order purchases of Feb 5, Feb 7.5, Mar 5 and Jan 2011 7.5 calls. The Jan 2010 5 calls have similar order flow recently. That's opening OTM call purchases on at least 5 different lines in a $4 stock.

Take note, there is a some non zero chance that this is a call purchaser that is selling stock and using the calls as upside protection (i.e. Long Call + Short Stock = Long Put). This issue used to be hard to borrow - as of right now the option markets do not imply a negative rate (no longer hard to borrow). This means selling stock is less expensive for the shorts - so the idea of using calls with short stock as puts is less expensive.

There are three possibilities here: (1) Obvious opening order upside tip-off (2) Less obvious short interest using calls as puts (3) None of the above. You can check the short interest on TASR of late to try to decipher betwen (1) and (2).

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