Wednesday, August 28, 2013
TASER Int'l (TASR) - Stock Explodes, Volatility Explodes More. Options Reflect More Upside to Come.
TASR is trading $11.30, down 4.6% with IV30™ spiking 12.8%. The LIVEVOL® Pro Summary is below.
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TASER International, Inc. (TASER) is engaged in development, manufacture and sale of electronic control devices (ECDs) designed for use in the law enforcement, military, corrections, private security and personal defense markets. Federal, state and local law enforcement agencies in the United States and globally represent the target market for its TASER ECDs.
I found this stock using a real-time custom scan. This one hunts for vol gainers on the day. But there is so much more goin on with this firm in the options realm -- elevated vol and reverse skew along with a rocketing stock price. This is a juicy one...
Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percent Change GTE 10
Average Option Volume GTE 1,200
IV30™ Change GTE 7
The one-year TASR Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).
On the stock side we can that this was a $5.55 stock a year ago, and has more than doubled in twelve months. But more interesting is how that return evolved. First, the stock went from that $5.50 (ish) level to ~$8 on an earnings release in October of 2012. Then there was a quiet period and a nice equilibrium seemed to be reached. Then there was the last six weeks.
On 8-12-2013 this was an $8.60 stock. Today it's trading over $11, up 31% in less than two months. And is there a vol story behind the move, yeah, there is...
Let's turn to the one-year IV30™ chart in isolation, below.
We can see that the implied has popped from 42.66% on 8-2-2013, to now over 64% or a 50%+ pop in this time period (less than two months). So we see a stock popping on exploding vol, and then today we get another volatility spike. The volatility plot thickens when we turn to the Skew Tab, below.
Check out the skew shape for Sep and Oct options. it's decidedly upward sloping, which is the reverse of "normal" skew. The option market reflects substantially greater upside risk (potential) then downside risk even after a rip roaring six-week stock rise and volatility spike. So, in English, the option market reflects a greater probability of an upside move than a downside move. To learn about skew you can read this post: Understanding Option Skew -- What it is and Why it Exists
Finally, let's look to the Options Tab (below).
Across the top we can see that Sep vol is priced to 63.73% and Oct vol is priced to almost the identical level. It's Dec and Mar'15 where the volatility drops considerably. So, the option reflects elevated risk right now and for the next two-months in TASR with a decidedly upside tilt... Of course, that does not mean the stock is going up -- it means the options are priced that way, potentially due to upside speculation.
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This is trade analysis, not a recommendation.