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📚 TSM | Taiwan Semiconductor Double Calendar Options before Earnings | Capture Rising Volatility Backed by Implied Volatility Edge

Options Hunter joined discussion · Oct 9 16:07

As Taiwan Semiconductor Manufacturing Company Limited ( $Taiwan Semiconductor (TSM.US)$ ) gears up for its Q3 2025 earnings (expected Oct 16, 2025), the stock has been heating up along with the entire semiconductor sector — fueled by AI demand, chip expansion, and strong tech momentum from names like $NVIDIA (NVDA.US)$, $Advanced Micro Devices (AMD.US)$, $ASML Holding (ASML.US)$, $CoreWeave (CRWV.US)$ , $Navitas Semiconductor (NVTS.US)$ etc

📚 TSM | Taiwan Semiconductor Double Calendar Options before Earnings | Capture Rising Volatility Backed by Implied Volatility Edge

Source: OptionStrat.com

Instead of guessing direction, I’m already holding profit with my Double Calendar — a professional pre-earnings strategy built to capture rising implied volatility (IV) and time decay on both sides before the earnings announcement, which I entered earlier at 13 days before earnings based on my backtested strategy.

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🧠 Trade Thesis

🌏 Step 1: Top-Down Sector & Market View

Source: https://nextgeninvestors.substack.com/p/initial-report-tsmc-tpe2330-121-5

🔹 Semiconductor Sector

– Global chip demand remains strong thanks to AI, EV, and data center growth.

– TSM sits at the core of global chip supply, producing for $NVIDIA (NVDA.US)$ , $Apple (AAPL.US)$ , and $Advanced Micro Devices (AMD.US)$ .

– Semiconductor ETFs (like $iShares Semiconductor ETF (SOXX.US)$ , $VanEck Semiconductor ETF (SMH.US)$ ) have shown steady uptrends since early 2025, signaling investor confidence.

Source: https://finviz.com/groups.ashx

🔹 Market Context

– The broad market ( $SPDR S&P 500 ETF (SPY.US)$ ) is making few new highs lately and tech sector ( $Invesco QQQ Trust (QQQ.US)$ ) remains the leading sector driving this move.

– October seasonality tends to favor tech stocks, with volatility rising into earnings.

– TSM typically performs best in risk-on environments, when investors seek innovation plays.

💡 Step 2: Seasonal & Historical Insights

Past seasonality insights showed that October tends to be a moderately bullish month for TSM with some downside volatility. Moderate standard deviation (8.68) compared to other months means that the stock has a higher likelihood of staying within the range of $280 to $310.

Source: Tradingview.com

Historically, the 7 days before TSM earnings show an average price move of ±4.3% or $304.52 (with $13.06 to the upside to $317.58 or downside to $291.46), often staying within a $280–$310 range.

🧩 Step 3: Fundamentals Snapshot

Source: Tradingview.com

✅ Bullish Factors

– $36.8B cash → strong balance sheet for R&D and AI expansion.

– Consistent profitability despite chip-cycle headwinds.

– Global leadership in 3-nanometer and AI chip manufacturing.

– Low debt, solid cash flow, and expanding customer base.

⚠️ Bearish Factors

– Margin pressure from competition and capacity costs.

– EPS growth flattening slightly in 2025.

– Macro slowdown or export restrictions could weigh on demand.

📈 Step 4: Technical Overview

– Support: $280–$290

– Resistance: $310–$320

– Stock is consolidating near mid-range → ideal for neutral volatility plays.

– Next profit target: Based on consensus rating, profit target is between $288.30 - $330 (or an average $309 target), consistent with upper range of the double calendar spread

💬 Step 5: Market Sentiment

– Analyst consensus: Strong buy

– Retail Sentiment: Bearish signals on TSM stock with short term selling pressure

– Institutional Flows: Funds rotating back into TSM as macro risk stabilizes showing rising demand

🔍Step 6: Option Strategy: Double Calendar Spread (Pre-Earnings Play)

🎯 Goal: Profit from rising volatility and time decay before earnings, without needing a strong price move.

🧾IV Review

Right now, IV is higher than HV. If the front month is short against the back month, it will be profitable when the price between both calendars widened.

5 out of 8 IV cycles before earnings show IV spike before earnings

🧾Options Setup

– Front Month

◦ Sell $310 Call - TSM 251017 310.00C

◦ Sell $280 Put - TSM 251017 280.00P

– Back Month

◦ Buy $310 Call - TSM 251024 310.00C

◦ Buy $280 Put - TSM 251024 280.00P

(You can fine-tune strikes around the current price or based on the 'expected move' range)

🧩 This structure sells short-dated options that decay quickly while holding longer-dated ones that benefit from IV rise.

🧾 Options Expiration: Sell October 17, 2025 (8 DTE) and Buy October 24, 2025 (15 DTE)

💰 Max Profit: ~ $641.57

⚠️ Max Loss: ~$366.70

🎯 Breakeven: ~ $268.165 and $326.818

💰 Profit & Risk Snapshot

✅ Max profit: If TSM stays near the short strikes ($280-$310) ⚠️ Max risk: Limited to the net debit paid for both calendars. 📈 Best case: Volatility rises into earnings + stock stays range-bound. 📉 Worst case: Large breakout before earnings reduces tent value.

🧭 Trade Plan

1. Enter about 10–14 days before earnings when IV begins to rise.

2. Target 20-30% profit

3. Exit before earnings to prevent IV crush

4. Avoid holding through earnings

5. Manage actively if price breaks the calendar spread range.

✅ Pros

– Captures pre-earnings IV rise

– Limited risk compared to naked call or put options.

– Profits from time decay and range-bound action.

⚠️ Cons

– Loses value if the stock makes large directional moves early.

– Requires monitoring and possible rolling adjustments.

– Modest profit range — not for momentum chasers.

📊 Summary

– Fundamentals: Strong financials & AI exposure.

– Technical: Range-bound setup around key levels.

– Sentiment: IV rising + short term bearish bias + long term bullish bias = ideal calendar setup.

– Strategy: Double Calendar — trade volatility, not direction.

– Edge: 5 of last 8 earnings cycles showed IV spikes pre-earnings.

🧠Thoughts?

How about you? Will you trade TSM into earnings or wait for post-report momentum? Share your thoughts:

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2) Comment down below so we can learn from different outlooks, theses, and strategies from each other—don't be shy!

Happy trading this week! Let’s discuss volatility, setups, and trade management ideas together! 💬

📌 This post is for educational and entertainment purposes only. Not financial advice. Options trading involves significant risk. Always DYOR before trading.

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