TSEM Butterfly Strategy
TSEM (Tower Semiconductor Ltd.), in the Technology sector, (Semiconductors industry), listed on NASDAQ.
Tower Semiconductor Ltd., an independent semiconductor foundry, manufactures and markets analog intensive mixed-signal semiconductor devices in the United States, Japan, other Asia countries, and Europe. It provides various customizable process technologies, including SiGe, BiCMOS, mixed signal/CMOS, RF CMOS, CMOS image sensor, integrated power management, and MEMS. The company also offers wafer fabrication services and design enablement platform for design cycle, as well as transfer optimization and development process services to integrated device manufacturers and fabless companies. It serves various markets, such as consumer electronics, personal computers, communications, automotive, industrial, aerospace, military, and medical device products. The company was incorporated in 1993 and is headquartered in Migdal Haemek, Israel.
TSEM (Tower Semiconductor Ltd.) trades in the Technology sector, specifically Semiconductors, with a market capitalization of approximately $30.26B, a trailing P/E of 130.23, a beta of 0.85 versus the broader market, a 52-week range of 37.48-271.92, average daily share volume of 2.8M, a public-listing history dating back to 1994, approximately 6K full-time employees. These structural characteristics shape how TSEM stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.85 places TSEM roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. The trailing P/E of 130.23 is on the rich side, which tends to correlate with higher earnings-window IV expansion as the market debates whether forward growth supports the multiple.
What is a butterfly on TSEM?
A long call butterfly buys one lower-strike call, sells two ATM calls, and buys one higher-strike call, paying a small net debit for a defined-risk position that maxes out if the underlying pins the middle strike at expiration.
Current TSEM snapshot
As of May 15, 2026, spot at $275.31, ATM IV 88.70%, IV rank 76.84%, expected move 25.43%. The butterfly on TSEM below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 28-day expiry.
Why this butterfly structure on TSEM specifically: TSEM IV at 88.70% is rich versus its 1-year range, which makes a premium-buying TSEM butterfly relatively expensive in absolute-cost terms, with a market-implied 1-standard-deviation move of approximately 25.43% (roughly $70.01 on the underlying). The 28-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated TSEM expiries trade a higher absolute premium for lower per-day decay. Position sizing on TSEM should anchor to the underlying notional of $275.31 per share and to the trader's directional view on TSEM stock.
TSEM butterfly setup
The TSEM butterfly below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With TSEM near $275.31, the first option leg uses a $260.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed TSEM chain at a 28-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 TSEM shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $260.00 | $34.70 |
| Sell 2 | Call | $275.00 | $27.25 |
| Buy 1 | Call | $290.00 | $21.00 |
TSEM butterfly risk and reward
- Net Premium / Debit
- -$120.00
- Max Profit (per contract)
- $1,273.16
- Max Loss (per contract)
- -$120.00
- Breakeven(s)
- $261.20, $289.05
- Risk / Reward Ratio
- 10.610
Max profit equals the wing width minus net debit times 100 (reached when the underlying pins the middle strike); max loss equals the net debit times 100. Two breakevens at lower-wing plus debit and upper-wing minus debit.
TSEM butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on TSEM. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
| Underlying Price | % From Spot | P&L at Expiration |
|---|---|---|
| $0.01 | -100.0% | -$120.00 |
| $60.88 | -77.9% | -$120.00 |
| $121.75 | -55.8% | -$120.00 |
| $182.62 | -33.7% | -$120.00 |
| $243.50 | -11.6% | -$120.00 |
| $304.37 | +10.6% | -$120.00 |
| $365.24 | +32.7% | -$120.00 |
| $426.11 | +54.8% | -$120.00 |
| $486.98 | +76.9% | -$120.00 |
| $547.85 | +99.0% | -$120.00 |
When traders use butterfly on TSEM
Butterflies on TSEM are pinning bets - traders use them when they expect TSEM to settle near a specific level at expiration (often the prior close, a round number, or the max-pain strike) and want defined-risk exposure to that outcome.
TSEM thesis for this butterfly
The market-implied 1-standard-deviation range for TSEM extends from approximately $205.30 on the downside to $345.32 on the upside. A TSEM long call butterfly is a pinning play: it pays maximum at the middle strike if TSEM settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current TSEM IV rank near 76.84% sits in the upper third of its 1-year distribution, which historically reverts; this raises the bar for premium-buying structures and lowers it for premium-selling structures on TSEM at 88.70%. As a Technology name, TSEM options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to TSEM-specific events.
TSEM butterfly positions are structurally neutral / pin (limited-risk, limited-reward); the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. TSEM positions also carry Technology sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move TSEM alongside the broader basket even when TSEM-specific fundamentals are unchanged. Always rebuild the position from current TSEM chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on TSEM?
- A butterfly on TSEM is the butterfly strategy applied to TSEM (stock). The strategy is structurally neutral / pin (limited-risk, limited-reward): A long call butterfly buys one lower-strike call, sells two ATM calls, and buys one higher-strike call, paying a small net debit for a defined-risk position that maxes out if the underlying pins the middle strike at expiration. With TSEM stock trading near $275.31, the strikes shown on this page are snapped to the nearest listed TSEM chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are TSEM butterfly max profit and max loss calculated?
- Max profit equals the wing width minus net debit times 100 (reached when the underlying pins the middle strike); max loss equals the net debit times 100. Two breakevens at lower-wing plus debit and upper-wing minus debit. For the TSEM butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 88.70%), the computed maximum profit is $1,273.16 per contract and the computed maximum loss is -$120.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a TSEM butterfly?
- The breakeven for the TSEM butterfly priced on this page is roughly $261.20 and $289.05 at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current TSEM market-implied 1-standard-deviation expected move is approximately 25.43%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on TSEM?
- Butterflies on TSEM are pinning bets - traders use them when they expect TSEM to settle near a specific level at expiration (often the prior close, a round number, or the max-pain strike) and want defined-risk exposure to that outcome.
- How does current TSEM implied volatility affect this butterfly?
- TSEM ATM IV is at 88.70% with IV rank near 76.84%, which is elevated relative to its 1-year range. Premium-selling structures (covered call, cash-secured put, iron condor) generally look more attractive when IV rank is high; premium-buying structures (long call, long put, debit spreads) are more expensive in that regime.