August 15th Options Now Available For Tower Semiconductor (TSEM)

Analysis of Tower Semiconductor Ltd. (TSEM) options reveals potential strategies for investors. Selling a $38.00 put offers a 3.55% return (22.36% annualized) if it expires worthless, with a 62% probability based on current data. A covered call strategy selling the $42.00 call yields 3.77% (23.74% annualized) if unassigned, with a 55% probability. The implied volatility for both options is approximately 58%, compared to a trailing twelve-month volatility of 48%.

Analysis

Analysis of Tower Semiconductor Ltd. (TSEM) options highlights two specific strategies. For investors considering acquiring TSEM shares, currently trading at $39.77, selling the $38.00 strike put contract with a bid of $1.35 presents an alternative. This strategy results in an effective cost basis of $36.65 per share if assigned, a discount to the current market price. There is a 62% statistical probability of this out-of-the-money put expiring worthless, in which case the seller retains the $1.35 premium, representing a 3.55% return on the cash commitment (22.36% annualized YieldBoost). Separately, for existing TSEM shareholders, selling the $42.00 strike call contract (bid $1.50) as a covered call offers potential income. If TSEM shares are called away at the August 15th expiration, the total return would be 9.38% (before commissions). If this out-of-the-money call expires worthless, which current data suggests has a 55% probability, the investor retains the shares and the premium, achieving a 3.77% YieldBoost (23.74% annualized). Notably, the implied volatility for both option contracts is approximately 58%, which is higher than TSEM's actual trailing twelve-month volatility of 48%, suggesting options are pricing in greater expected future price swings than historically observed.

Key Decisions for Investors

• Investors interested in acquiring Tower Semiconductor Ltd. shares at a lower price than the current $39.77 could consider selling the $38.00 strike put, potentially achieving a cost basis of $36.65 or earning a 3.55% return if the option expires worthless.
• Current TSEM shareholders seeking to generate income could evaluate selling the $42.00 strike covered call, which offers a 3.77% premium yield if the option expires unassigned or a total return of 9.38% if shares are called away by the August 15th expiration, albeit capping further upside.
• Given the implied volatility of approximately 58% exceeds the historical volatility of 48%, option selling strategies may appear attractive due to higher premiums, but investors should be mindful this also reflects market expectations of increased share price volatility.