$TSM call prices surge 3-fold

Bullish option traders are racking up major profits today in Taiwan Semiconductor Manufacturing (TSM) for the second session in a row.

On July 18, our tracking systems detected the purchase of 17,300 January $46 calls for $1.65 above open interest of 42 contracts as part of a bullish spread with shares at $42.48. Market Rebellion co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for as much as $5.08 today, more than 3 times their purchase price. The stock rose 16.24% in the same time period, underscoring 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.

It is the second winning trade in the name posted on Market Rebellion in as many days.

TSM is up 1.14% to $49.24 in midday trading. Citi analyst Atif Malik said on Oct. 4 that he expects positive quarterly results when the chip maker reports earnings before the market opens on Oct. 17.