Taiwan Semi faces bearish play


A huge put trade is positioning for a pullback in Taiwan Semiconductor.

optionMONSTER's Depth Charge system detected the sale of 14,600 July 20 puts for $0.31 in volume below previous open interest of 18,739. The same number of October 21 puts were bought for the ask price of $1.30 with open interest of only 1 contract in that strike, showing that it is a new position.

The trader is likely closing the nearer-dated contracts and rolling the position three months later. He or she is also buying the new puts at a higher strike that is closer to the money , which would provide higher returns if shares drop. Long puts lock in the price where a stock can be sold no matter how far it might fall, letting traders profit from a decline with potentially substantial leverage. (See our Education section)

TSM was down fractionally on Friday to close at $21.09. The chip maker has been trending higher from below $17 in the last four months and posted a 52-week high of $21.30 on Tuesday.

The put roll dominated TSM's total option volume of more than 30,000 on Friday, which far eclipsed its daily average of 1,065 for the last month. 

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