This week we’re looking at another Investor’s Business Daily (IBD) Top 50 Listed Companies. We use this list in one of our options portfolios to identify outperforming stocks and place option spreads that take advantage of the momentum.
TSM’s solid fundamentals and positive technical outlook make it an attractive stock to buy at Dips. Check out what the following two articles have to say about the company’s growth prospects: Taiwan Semi Puts $ 28 Billion on Growing Chip Demand and Taiwan Semiconductor Manufacturing: Our Top Tech for 2021 is at the Center of the next wave of technology .
When you zoom out on a larger time frame such as a weekly or monthly chart, it is a straight line line for TSM. The stock grew 47% over the past three months, up 124% year over year. The slump has been minor over this period, meaning the current 5% decline from recent highs could be a buying opportunity. Support comes from the bottom line of a rising trend channel that has been holding price action since late December. There is also a horizontal plane near the bottom of the channel at $ 128.50 to create a support confluence.
If you’re okay with TSM having more benefits ahead of you, consider this trade, which depends on the stock staying above $ 129 by the expiration in five weeks.
Buy to open TSM 26FEB21 126 Puts (TSM210226P126)
Sell To Open TSM 26FEB21 129 Puts (TSM210226P129) for $ 1.45 credit (sale of a vertical)
This credit is $ 0.02 below the midpoint of the options spread when TSM was trading near $ 129. If the stock doesn’t recover quickly from here, you should be able to get close to that amount.
Your commission on this trade is only $ 1.30 per spread. Each spread would then be $ 143.70. This reduces your purchasing power by $ 300 and your investment by $ 156.30 ($ 300- $ 143.70). If TSM closes above $ 129 on February 26, both options will expire worthless and your return on the spread will be 92% ($ 143.70 / $ 156.30) or 1049% on a yearly basis.
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
We noticed that the Investor’s Business Daily The top 50 list has been a reliable source of stocks that are likely to rise higher in the short term. Recent additions to the list may be particularly good choices for this strategy, and deletions may be good indicators of getting out of a position you may already have in that stock.
As with all investments, you should only trade options with money that you can really afford to lose.
Have fun trading,
Tags: Bearish Options Strategies, Bullish Options Strategies, Monthly Options, Options Tutorial Program, Profit, Gains, Puts, Risk, Taiwan Semiconductors, Tech Stocks, Terry’s Tips, TSM, Vertical Put Spread, Weekly Options
This entry was posted on Monday, January 25th, 2021 at 3:31 pm and is filed under 10K Strategies, Last Minute Strategy, Lazy Way Strategy, Monthly Options, Stock Option Trading Idea of the Week, Stock Option Strategies, Terry’s Tips -Portfolios, Weekly Options.