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Taiwan Semi draws puts at highs

Mike Yamamoto (mike.yamamoto@optionmonster.com)

A large put buyer is positioning for a pullback in Taiwan Semiconductor, which is trading at its highest levels since the dot-com bubble.

optionMONSTER's Depth Charge system detected the purchased of 9,900 June 20 puts in one print for the ask price of $0.80 on Friday when the stock was trading for $19.87, so they were bought  at the money . Open interest in the strike was just 295 contracts before the trade appeared, clearly showing that it is a new position.

Puts are often purchased to hedge long positions but can also be used to make outright bearish bets, especially when they are at or in the money . In either case, these TSM puts could expire worthless if shares rally past $20 by expiration in mid-June. (See our Education section)

TSM fell 3.16 percent on Friday to close at $19.91. The chip maker fell to $16.44 in early February but then climbed all the way to $20.92 when it reported earnings on April 17--the stock's highest level since March 2000.

Overall option volume in TSM surpassed 23,400 contracts on Friday, more than 11 times its daily average for the last month. Puts made up 95 percent of that total, a reflection of the session's bearish sentiment.

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