Tower Semiconductor Ltd (TSEM) Tech Deal Triggers Options Activity

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

Mar 3, 2015 at 10:41 AM
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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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