Vertical Debit Spread Nets Quintuple Profit in 4 Days

Option open interest (OI) was also highly concentrated at the 90-strike

Managing Editor
Jun 2, 2023 at 3:23 PM
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Subscribers to Chart of the Week received this commentary on Sunday, May 14

Subscribers to Schaeffer's Grand Slam Countdown saw a more than 485% profit with our Taiwan Semiconductor (TSM) weekly 5/26 94- and 97-strike calls, a vertical call spread. Our Grand Slam Countdown trades will be front-week call or put options targeting gains of up to 300%, based on our Expectational Analysis approach. Below, we'll unpack the drivers that inspired this bullish bet and snagged our subscribers an impressive profit in only a matter of days.

 

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At the time of our recommendation on Sunday, May 21, Taiwan Semiconductor stock had seen several holds at the key 200-day moving average. The equity also had managed to rally the week prior, breaking a string of lower 2023 highs, catapulting TSM above the aforementioned trendline.

Option open interest (OI) was also highly concentrated at the 90-strike and below, resulting in less options-related “friction” for movement above current price levels. Implied volatility (IV) for TSM was also coming in lower than 99% of all other such readings from the past 12 months. In simpler terms, this improved the reward-risk equation for our recommended vertical call spread.

TSM started the week with three straight losses but held above the aforementioned lower highs. Then on May 25, the stock gapped higher by 12%, trading as high as $102.37. We closed the full position just before noon that day, allowing subscribers to more than quintuple their money in the span of four trading days. This trade perfectly encapsulates how vertical debit spreads eliminate time decay

 

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On May 25, Taiwan Semiconductor stock managed to turn in an impressive winning session of more than 11%. We closed the position on May 25, allowing subscribers to collect the 485%+ target profit in mere days. Don’t miss out on your next big profit opportunity, subscribe to Schaeffer's Grand Slam Countdown!

 

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