A Pre-Earnings Look at Taiwan Semiconductor Stock

TSM options are flying off the shelves ahead of earnings

Deputy Editor
Apr 19, 2023 at 12:22 PM
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Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) will step in to the earnings confessional before the open tomorrow. Below, we will explore TSM's post-earnings history to help gauge what options traders can expect this week.

Over the last two years, Taiwan Semiconductor stock has had a generally positive history of post-earnings reactions, five of the last eight next-day sessions higher. This time around, options traders are pricing in a 5.9% post-earnings swing for the security, which is slightly higher than the 3.9% move TSM averaged after its last eight reports, regardless of direction. 

TSM was last seen down 1.8% at $86.65, after a Wall Street Journal report indicated the company is pushing back on some conditions the U.S. attached to chip factory subsidies, and seeks up to $15 billion from the government. The shares' 110-day moving average has contained today's pullback, while TSM remains up 13.7% year-to-date.

TSM Chart April 192023

Put volume is running at double the intraday average amount, with 21,000 bearish bets across the tape versus 19,000 calls. The most popular contract, meanwhile, is the monthly April 91 call, where new positions are being opened.

Even with earnings looming, options looks like a prudent play. The stock's Schaeffer's Volatility Index (SVI) of 33% stands higher than just 9% of readings from the last year. This means options traders are pricing in relatively low volatility expectations for the time being. Even better, the security tends to outperform said volatility expectations, per its Schaeffer's Volatility Scorecard (SVS) tally of 92 out of 100.


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