Bulls bag their $TSM chips

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

On Oct. 8, Market Rebellion’s Unusual Activity Scanners identified the purchase of 17,500 April $95 calls for $7.18 to $7.50 as part of a bullish roll with shares at $87.50. This was clearly fresh buying, as volume was well above the previous open interest of 543 contracts.

Those calls traded for as much as $44.00 today, well over 5.5 times their purchase prices. The stock rose 58.51% in the same time period, showing how options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

TSM was up 4.1% at the close this session at $139.16, just shy of its new high of $139.23 made earlier in the day along with its broader sector.