Hey Traders,
Sometimes, Smart Money moves don’t always make sense.
Sometimes … you have to question just how “smart” Smart Money really is.
And this $18 million trade is an excellent illustration …
You might think that the semiconductor chip shortage might benefit the semiconductor industry…
But that doesn’t appear to be the case.
In fact, concerns about consumer spending slowdown are walloping the semi industry as a whole …
And Taiwan Semiconductor Manufacturing (Ticker: TSM) is a prime example!
Since briefly tapping a high of $145 in early January, the shares have taken quite the tumble.
As of Wednesday, TSM closed at just $99.01 … down nearly 32% from its January peak!
And yet … TSM’s revenue reports continue to show the company is up year-over-year, delivering good news to a market that simply doesn’t seem to care …
Last week, after delivering a promising earnings report which exceeded expectations and raising their 2022 guidance, the world’s largest chip contractor found their shares …
Down 3.1%!
It might be this kind of behavior that can explain this Big Money trade …
During Monday’s trading session, this Big Money trader decided to close and roll their existing position …
While also tempering their bullish ambitions for the semi stock!
It appears as though their current position of 15,000 May 110-strike calls had been slowly built up since January, including notable blocks of 5,000 calls bought on January 7 for $18.90, and 5,000 calls bought on January 13 for a whopping $33.15.
(While we can’t guarantee that these were the same trader … the open interest record seems to imply that it is likely.)
Considering these calls are now selling for $0.75 … well, this trader is definitely taking one on the chin here … to put it mildly!
They’re keeping their bullish stance … but looking a little further out in time, and aiming for a little less upward movement out of the shares.
At the same time this trader sold their May 110-strike calls, they also purchased 15,000 August 90-strike calls, paying $13.20!
This trade required a serious chunk of change, with an additional outlay of $18,675,000!
Right now, it looks like this trader nearly has a monopoly on the August 90-strike contract, accounting for all but 399 of the current outstanding contracts …
In the pits, traders seem split, with TSM’s call vs put open interest just about equal … a little more call-skewed than usual.
So what do we think?
Is this Big Money bettor getting ready to take another massive loss …
Or will this $18 million bullish bet finally pay off?
Your Only Option,
Mark Sebastian