Trade Alert - (TSM) April 13, 2021 - SELL-TAKE PROFITS

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.

 

Tech Alert - Taiwan Semiconductor Manufacturing Company Limited (TSM)- TAKE PROFITS

SELL Taiwan Semiconductor Manufacturing Company Limited (TSM) April 2021 $111-$116 in-the-money vertical BULL call spread at $4.65

Closing Trade

4-13-2021

expiration date: April 16, 2021

Portfolio weighting: 10%

Number of Contracts = 22 contracts

This was a short-term bet that chip company Taiwan Semiconductor Manufacturing Company Limited (TSM) would stay above $116 by April 16.

TSM opened up 1.5% today and with option prices still fluctuating out of the gate, I had to wait off on getting proper prices.

Even though TSM has retraced from 1.5%, I will take this exit point with a modest profit.

Yesterday was an extremely disappointing day in terms of TSM price action to the underlying stock, and as we approach April expiration, the stock underperformed the broad Nasdaq on no bad news.

So, it’s sensible to lock in profits on this short-term trade and reload for another one when we get an optimal entry point.

I would highly recommend jumping into Uber (UBER) if the stock sells off on earnings. They should outperform in 2021.

For all the long-term buy and hold investors, this is a gem for your portfolio.

Taiwan Semiconductor is the world's largest semiconductor company and as far as revenue goes, this foundry giant has taken the crown away from Intel in chip fabrication in recent years.

TSM currently claims a 57% market share in the global chip fab industry. 

Its advanced manufacturing technology has been key to its success. Its 5-nanometer chip production (the smallest, most power-efficient, and powerful computing processors around) puts it way ahead of its peers.

As a result, nearly all fabless semiconductor companies around the globe have turned to TSMC as a trusted production partner.

From chips that power 5G mobile networks to those that underpin artificial intelligence systems, TSMC can handle the production job.

The company just announced that it plans to spend $100 billion over the next three years to increase its production capacity. This is because the company hasn’t been able to keep up with demand over the past year despite running its fabrication plants at over 100% utilization.

TSMC continues to pay a dividend that currently yields 1.5% a year.

If bought, hold the stock, my end-of-year target is $170.

Here are the specific trades you need to exit this position:

Sell to Close 22 April 20201 (TSM) $111 calls at…………$11.00

Buy to Close 22 April 2021 (TSM) $116 call at……...…….$6.35

Net Proceeds:……………………............…….………..…….....$4.65

Profit: $4.65 - $4.40 = $.25

(22 X 100 X $.25) = $550 or 5.7% in 10 days

 

If you are uncertain on how to execute an options spread, please watch my training video by clicking here.

The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.

Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.

Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.