Unusual Options Activity: Taiwan Semiconductor Manufacturing (TSM)

Chipmaker Taiwan Semiconductor Manufacturing (TSM) recently jumped 12 percent and is back near its 52-week high. One trader sees a further rally ahead.

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  • That’s based on the August $105 calls. With 81 days until expiration, 8,187 contracts traded compared to a prior open interest of 155, for a 53-fold rise in volume on the trade. The buyer of the calls paid $5.45 to make the bullish bet.

    TSM shares recently closed near $101, so shares only need to rise another $3 for the option to move in-the-money. The 52-week high is $102.37, so traders are betting on a breakout to new highs from here.

    Shares are now flat over the past year, but the company’s positioning as the world’s leading semiconductor manufacturer leaves it as a strong contender for a continued move higher.

    Amid a slow year for the industry, TSM managed to grow revenues and earnings by low-single-digit levels, but still posted a profit margin of 44 percent.

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  • Action to take: Investors may want to buy some shares now, and use a future drop to add to that position. TSM also pays a dividend just under 2 percent at current prices.

    For traders, betting on a move higher plays to the rally underway in shares. While it will stop at some point, the trade could be good for a few weeks or even before expiration, and stands a good chance of moving in-the-money.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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