Taiwan Semiconductor Manufacturing (TSM) PriceWatch Alert Could Hit 20.04% Return

Posted: Tuesday, April 14, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Taiwan Semiconductor Manufacturing (NYSE: TSM) closed yesterday at $9.98. So far the stock has hit a 52-week low of $5.83 and 52-week high of $11.97. Taiwan Semiconductor Manufacturing stock has been showing support around 9.38 and resistance in the 10.32 range. Technical indicators for the stock are Bullish and S&P gives TSM a positive 4 STAR (out of 5) buy rating. TSM appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 10 covered call (WBB AB) for a net debit in the $8.68 area. That is also the break even stock price for this trade. This covered call has a 277 day duration, provides 13.03% downside protection and a 15.21% assigned return rate for a 20.04% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the TSM Jan '10 7.50 Call (WBB AU) and selling the Jan '10 10 call (WBB AB) for a $1.65 debit. The trade has a 277 day life and would provide 8.32% downside protection and a 51.52% assigned return rate for a 68.00% annualized return rate (for comparison purposes only). Taiwan Semiconductor Manufacturing has a current annual dividend yield of 4.07%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]