Although Taiwan Semiconductor (TSM) easily ranks among the most relevant names in the market today, the journey forward hasn't always been smooth. Yes, TSM stock is up over 40% on a year-to-date basis, a byproduct of its foundry business feeding virtually the entire global supply of advanced artificial-intelligence hardware. However, the ticker happens to be down roughly 11% since the end of June.
Still, many investors are optimistic about TSM stock for the underlying fundamentals, which may very well enjoy permanent relevance. Notably, despite the near-term choppiness, the Barchart Technical Opinion indicator rates TSM as a 72% Strong Buy. While there might be some turbulence, the overall picture appears enticing.
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However, for those who are feeling incredibly aggressive, there may be a case for Taiwan Semi stock reaching $450 next month. Specifically, I'm looking at the 440/450 bull call spread expiring Sep. 18. For this trade to be fully profitable, TSM stock must rise through the $450 strike at expiration, which would trigger the maximum payout of 156.41% (at time of writing).
Nominally, this transaction involves paying a net debit of $390 (which is the most that can be lost) to hopefully earn a max profit of $610. Of course, with great reward comes great risk. Right now, the Street has issued a probability of only 35.2% that the above call spread will break even.
Invert this figure and you're looking at a potential failure rate of 64.8%. Adding to the skepticism, Taiwan Semi stock last breached the $450 level in late June. Why then should traders believe that the tech ticker will rise more than 5.5% over the next five weeks?
Extract — continue reading at the source.
