Why Selling This Iron Condor in TSM Makes Sense for a $2.69 Credit

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This TSM Iron Condor Can Net 62% in 7 Days

Outlook is neutral, with stock confined to a span of ±3%

Strategy has +62% ROI potential and 52% overvalued

Buy119 Put
Sell126 Put
Sell135 Call
Buy142 Call

Taiwan Semiconductor Manufacturing Company Ltd. has fallen by -1.0% today to $129.20. Over the last two weeks, the stock has traded between $112.61 and $135.17. Based on historical stock price behavior, this spread for TSM has a theoretical 71% success rate.

Option Profit Calculator for TSM Iron Condor at 23-Feb-24 Expiration

If TSM stock price at expiration is between $126.00 and $135.00, this spread has a 62% upside potential

As you can see in the chart above, the optimal outcome is for TSM stock price to close between $126.00 and $135.00 at the February 23, 2024 expiration. Within that price range, all of the options will expire worthless, and you'd keep the original $2.69 credit you received at the time of the trade.

The maximum gain will be realized if the stock price is between $126.00 and $135.00. The maximum gain is $2.69

The maximum loss would occur if the stock price at expiration is below $119.00 or above $142.00. The maximum loss is $4.31

TSM Spread Current Market Price vs. Historical Average

TSM Iron Condor is trading at a 52% premium to historical average.

Using historical data to measure how a similar spread in TSM was priced in the market, the 4-year average value was 1.77, with a high mark of 2.77 and a low of 1.01.

Currently, this iron condor is bid at 2.69 and offered at 2.85. The midpoint of the spread is 2.77.

If we use 1.77 as our historical fair value benchmark, the current market bid price is at a 52% premium, while the current market midpoint represents a 57% premium.

Current PriceHistorical Values of Similar Iron Condors
Market Chameleon captures daily records of market data to calculate historical benchmarks and generate estimated values.

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