Semiconductor manufacturer Taiwan Semiconductor (TSM) is up 88% over the past year, and just provided strong guidance in the quarters ahead. One trader is betting on a further rally.
That’s based on the May $200 calls. With 113 days until expiration, 20,265 contracts traded compared to a prior open interest of 553, for a 37-fold rise in volume on the trade. The buyer of the calls paid $25.65 to make the bullish bet.
Taiwan shares recently traded for about $212, meaning the options are already about $12 in-the-money. Taiwan is slightly off its 52-week high of $222.20.
Operationally, Taiwan has had a stellar year. Earnings are up 54%, and revenues surged by 39%, and Taiwan managed to generate a 39% profit margin. More upside is expected in the year ahead.
Taiwan is the global leader in the actual manufacturing of semiconductor chips, and looks set to benefit from the rollout of AI, no matter who develops the latest hot AI-related chip.
Action to take: Investors may like shares here, given their further upside potential. And investors should look to buy shares during any significant market pullback. Taiwan Semiconductor also pays a 1.3% dividend at current prices.
For traders, the May $200 calls could see mid-double-digit returns from further upside. More aggressive traders may want to use a higher strike price to look for a lower-cost option with the potential for higher percentage returns.
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 company mentioned in this article.