The article details two options strategies on Tower Semiconductor (TSEM) designed to enhance yield: selling a cash-secured put at the $67.50 strike, which could lower the effective purchase price to $62.80 with a 39.68% annualized return if unexercised, and a covered call at the $70.00 strike, offering a 10.77% total return if assigned or a 44.43% annualized premium boost if unexercised. These "YieldBoost" strategies, presented with probabilities of success and volatility data, illustrate methods for investors to generate income or reduce cost basis on TSEM shares.
The provided text details two specific options strategies on Tower Semiconductor (TSEM) designed for yield enhancement or tactical acquisition. The first strategy involves selling a cash-secured put at the $67.50 strike, which presents an opportunity for an investor to either acquire TSEM shares at an effective cost basis of $62.80 (a discount from the current $67.98 price) or, should the option expire worthless, realize a 39.68% annualized return on the cash collateral. The data suggests a 59% probability of this latter outcome. The second strategy is a covered call at the $70.00 strike for existing shareholders, which could generate a total return of 10.77% if the stock is called away by the November 21st expiration, or an annualized premium yield of 44.43% if it expires worthless, an event with a 47% probability. A key insight is the volatility differential: the implied volatility of the options (59% for the put, 54% for the call) is elevated compared to the stock's trailing twelve-month actual volatility of 52%. This suggests option premiums are relatively rich, making option-selling strategies theoretically more attractive as they offer higher compensation for the associated risk.
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