Taiwan Semiconductor Confirms $12B Factory in U.S.

TSM puts are popular today, as a result

by Jake Scott

Published on May 15, 2020 at 2:01 PM
Updated on Jun 24, 2020 at 10:16 AM

The shares of Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) are down 5.1% to trade at $49.73 at last check, even after the Apple supplier confirmed plans -- in conjunction with Qualcomm (QCOM) -- to build a $12 billion chip factory in Arizona. The move represents an attempt to give the U.S. a chance regain global supply chains back from China. The plant, which is slated to for a 2024 production target date, would create over 1,600 jobs and produce 5-nanometer chips used in high-end defense and communication devices.

On the charts, the shares have been in recovery mode ever since its mid-March drop to $43, but the rally lost steam at the $54 level. Now, TSM is poised to close below its recently supportive 50-day moving average for just the second time in a month. Year-over-year though, the equity is up 19.2%. 

TSM Chart May 15

In the options pits, TSM sports a 50-day put/call ratio of 0.52 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), a ratio that ranks in the 82nd percentile of its annual range. So while calls may outnumber puts on an absolute basis, the lofty ratio suggests a healthier-than-usual appetite for long puts of late.

Driving this point home, bears are out in droves for Taiwan Semiconductor stock. So far, 28,000 puts have exchanged hands -- more than nine times the intraday average -- against 13,000 calls. The most popular today is the  weekly 5/22 48.50-strike put, with new positions being opened. Buyers of these put are eyeing more losses for the semiconductor stock in the next week, when the options expire.

Not many analysts are throwing in their two cents on TSM, but the brokerages that are covering are divided. Of the three in coverage, two sport a "strong buy," versus one that says "strong sell." Meanwhile, the consensus 12-month target price of $53.23 is a measly 7.4% premium to current levels. 


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