Tiny Tucker Anthony Gets Tossed Into Options Rumor Mill

A few people think there's something afoot with Boston-based brokerage firm Tucker Anthony Sutro (TA Quote), at least if the unusual activity in the stock's options lately means anything.

Volatility Index
Close Today	% Change
19.62	+0.31
Source: ILX

On Tuesday, investors were sniffing around looking to buy the regional brokerage's thinly-traded call options. Typically, traders buy call options when they think a stock is going to have a significant move upward. A call is the type of option that gives the purchaser the right, but not the obligation, to buy a security for a specified price at a certain time and is basically a bet that the stock will go up.

Put/Call Ratio
Close Today	Previous Close
0.47	0.40
Source: ILX

Higher-than-usual volume and high implied volatility in the stock's options first popped up on options analysts' radar screens Friday, as the firm's shares advanced while the rest of the brokerage sector stock slumped. Implied volatility, the market's measure of how much it thinks a stock or index can move, has remained high over the past few days. On Tuesday morning, shares of Tucker Anthony hit an all-time high, peaking at 23 1/4, before easing back a bit. The stock was trading up 5/8 23 1/8.

Paul Foster, of 1010WallStreet.com in Chicago, noted on Friday that there was a huge move in the implied volatility in Tucker Anthony's options compared to Thursday levels. The analyst also highlighted the heavier-than-normal options volume on Tucker Anthony Friday.

On Tuesday, Foster said implied volatility for the September 22 1/2 options stood at 72, while for the September 20s, it stood at 62. Those levels were considerably higher than the 38-39 volatility range Tucker Anthony was showing Thursday, Foster said.

Abnormally large increases in options volume and prices are signals to options analysts that there may be an upcoming corporate news event that could trigger a sharp move in a company's stock price.

Larry McMillan, of McMillan Analysis, pointed out that the options on Tucker Anthony have been expensive for a couple days. "Obviously, another takeover rumor regarding a brokerage firm is at work here," he wrote in a recent not to clients.

Fridays lately in the options market have been marked by brokerage firm takeout rumors floating around, none of which so far have come to fruition.

As for activity in Tucker Anthony options Tuesday, September 22 1/2 call options were the most heavily traded option, with volume of 130 contracts. The September 22 1/2 calls were trading up 7/16 ($43.75) to 1 15/16 ($193.75).

Brokerage takeover speculation has been hot this summer in the wake of UBS' (UBS Quote) announcement in July that it is buying PaineWebber (PWJ Quote).