Options brief, Oct 19, 2026

TSM: bullish thesis update (TSM is already an open bullish idea)

TSMC reported a record third quarter on October 15 and raised its outlook. Revenue was $46.72B, above the top of its own $44.6B to $45.8B guidance range. Net profit rose 68.7% year over year. Q4 revenue guidance is $52.3B to $54.3B, about 58% growth at the midpoint, and management raised 2026 growth guidance to roughly 44%. The shares fell anyway. At $420.64 the stock is about 14% below its $487.47 high, and the PHLX Semiconductor Index lost 11.4% last week as the CoreWeave credit selloff spread to chip stocks.

The new information is that earnings are rising while the price falls, and options are cheap. TSM's IV rank is 10 and its IV percentile is 6, so a long-dated at-the-money call costs less than usual. The June 2027 expiry runs past two more earnings reports. That gives the Q4 guidance time to show up in reported numbers. The near-term sell-off came from AI funding fears, not from orders TSMC lost. Liquidity is rated 4. Q3 earnings are already out, so no report is due soon.

The main risk is that the selloff in AI-related credit keeps spreading. If CoreWeave or other neoclouds can't refinance, buyers of TSMC's advanced chips could cut orders. Beta is 1.41, so a broad Nasdaq drawdown will hit this position hard. Management has also guided that capex will cut full-year 2026 gross margin by about 2 points. Hot inflation data (September CPI at 3.7%, PPI at 6.3%) could push rates higher and lower the multiple investors pay for growth.

CRWV: thesis update from neutral to bearish

The bond market now prices CoreWeave as a likely default. Five-year credit default swaps reached a record 1,194.5 basis points, which implies more than 60% default odds over five years. Its 9.625% notes due 2032 traded near a 15% yield, and some bonds fell to about 79 cents on the dollar. The company carries about $52B in debt and lease obligations, and The Inference counts $10.6B due by the end of 2027. Its three co-founders have sold $3.3B of stock since the IPO, $2.4B of it this year, Bloomberg reported.

That changes the earlier neutral view. Credit investors are pricing distress, while the stock at $63.86 is still above its $59.51 low. Hot inflation data (September CPI at 3.7%, PPI at 6.3%) raises the cost of refinancing that debt wall. Lab demand is also softer than hoped. The FT reported Anthropic's Q3 revenue at $16.8B, and Reuters reported that investors are discussing a $1.5T IPO valuation instead of $2T. Goldman's Asia trading desk said that revenue implied close to zero growth in August and September.

IV percentile is 98, so buying puts outright is expensive. The 60/40 put spread sells some of that rich volatility to cut the cost and caps the payout at $20 per share. The March 2027 expiry covers the November 9 earnings report.

The main risk is a rescue. Nvidia put in $2B of equity in January and offered to backstop data center buildouts. Jensen Huang said on October 15 that CoreWeave's cost of capital is falling, and ARK has kept buying shares. Beta is 2.68, and the stock rose 5.9% in one session last week, so a short squeeze or a strong Anthropic IPO could drive sharp rallies. Size the position so the full debit can be lost.