Bears bag their $TSM chips

Option traders are bagging big profits in Taiwan Semiconductor Manufacturing (TSM) today.

On Feb. 11, Market Rebellion’s Unusual Activity programs detected the the purchase of 6,100 May $110 puts for $3.30 to $3.70 above the existing open interest of 4,446 with shares at $126.06.

Those puts traded for $11.63 this session, about 3 times their average purchase price. The stock fell 20.8% in the same time frame, illustrating the kind of leverage that can be achieved quickly with options.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

TSM closed lower on the day by 1.29% at $101.18.