TSM Analysis

Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)

TSM publishes earnings on Thursday before the opening bell.

I shall use options that trade for the last time nine days hence, on July 21.

Implied volatility stands at 25%, which is 2.5 times the VIX, a measure of the volatility of the S&P 500 index.

TSM’s IV stands in the 79th percentile of its annual range and the 87th percentile of its most recent broad movement.

The price used for analysis was $35.63.

Premium: $1.25 Expire OTM  
TSM-iron fly Strike Odds Delta
Long 38.00 93.2% 7
Break-even 37.25
Short 36.00 58.8% 43
Short 36.00 40.8% 57
Break-even 34.25
Long 33.00 89.3% 10

The premium is 50% of the width of the position’s wings.

The risk/reward ratio is 1.4:1.

Decision for My Account

The trade described above is the best I an do with this grid. It’s not enough; the risk reward ratio is higher than I’m comfortable with. Therefore, I am passing on this trade.

By Tim Bovee, Portland, Oregon, July 12, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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