Tower Semiconductor Ltd (TSEM) Tech Deal Triggers Options Activity

Tower Semiconductor Ltd. (USA) (TSEM) options are heating up after an Intel deal

by Andrea Kramer

Published on Mar 3, 2015 at 10:41 AM
Updated on Jun 24, 2020 at 10:16 AM

Tower Semiconductor Ltd. (USA) (NASDAQ:TSEM) rallied to a three-year peak of $18.20 out of the gate, and was last seen 6% higher at $17.80. Traders are cheering the firm's freshly inked contract to produce infrared sensors for Intel Corporation's (NASDAQ:INTC) 3-D cameras, yet options traders today are either betting on a short-term dip or protecting their profits on TSEM.

Overall option volume is running at three times the typical intraday clip, and the equity's 30-day at-the-money implied volatility has edged 2.9% higher to 45.2%, indicating a growing appetite for short-term contracts. Most active is the now out-of-the-money April 16 put, which -- as alluded to earlier -- traders are purchasing to open to profit from or hedge against a retreat south of $16 before options expiration on Friday, April 17.

Whatever the motive, TSEM's short-term options crowd is already more put-skewed than usual. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.71 sits just 5 percentage points from an annual high. However, premium buyers are picking up TSEM's near-term contracts at a historical discount, as the equity's Schaeffer's Volatility Index (SVI) of 45% stands higher than just 7% of all other readings from the past year.

Technically speaking, Tower Semiconductor Ltd. (NASDAQ:TSEM) has more than doubled over the past year, and has already advanced more than 33% in 2015. As such, the equity's 14-day Relative Strength Index (RSI) sits at 70 -- in overbought territory, suggesting a short-term breather could be on the horizon.


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