Weekend Trader Alert

Weekend Trader Alert

March 26, 2023

Open Positions Update

There are no portfolio updates this week.

The following is this week's recommendation:


Taiwan Semiconductor (TSM)

Place a limit order to buy the Taiwan Semiconductor (TSM) June 16, 2023 90-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, March 24, this option was offered at $8.55. TSM closed at $92.79 on Friday, March 24.

Do not attempt to enter this position after Monday's close.

Please use the following guidelines to manage the position:
  • Exit the position if the option is at a 100% gain from your entry price.
  • If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, April 24, close the position.
  • If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Taiwan Semiconductor (TSM) is breaking out of a falling wedge pattern on the charts. The shares also overcame resistance at the $90 level, which has provided pressure since mid-February, and recently found support at their 80-day moving average.
 
Furthermore, TSM has held above its most recent post-earnings bull gap, and broke above its +20% year-to-date breakeven level, which had been keeping a cap on gains recently.

 
There is plenty of potential for last year’s downgrades to be reversed as tech recovers and the dollar falls, with three of the 12 analysts in coverage carrying a “hold.”
 
Now looks like a good time to weigh in on the security's next move with options. The stock is seeing attractively priced premiums at the moment, per TSM's Schaeffer's Volatility Index (SVI) of 37%, which sits in the 22nd percentile of its annual range. Plus, the security's Schaeffer's Volatility Scorecard (SVS) of 96 out of 100 means the stock has exceeded option traders' volatility expectations during the past year.

Our recommended June 90-strike call has a leverage ratio of 6.8, and will double in value on a 15.4% pop in the underlying shares.

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