TSM - I'm kind of surprised that IV is as low as it is

The IV on TSM for Jan 2023 is roughly 33, looking at some comps for the same date:

INTC: 34
AMAT: 41
QQQ: 28
SOXX: 34

What’s interesting about this is it does not seem like the market is pricing in any invasion risk into TSM’s options. What are your thoughts about this? I know that a lot of people say there’s no chance that taiwan gets invaded by china, but with the recent US provocations, who knows?

I’m thinking about an options pairs trade here, something like
Long 40% OTM TSM puts
Short 40% OTM puts on other comparable companies/ETFs for equivalent notional

The trade should be premium-neutral, and overall delta-neutral for market movements, but will pay off if china invades taiwan, which would likely drive the value of TSM down to close to 0.


Are sanctions on China out of the question? What would they even look like?

I know this is a rumor, but saw this and it had me thinking.

IV is still low on TSM puts. If there is a pull up back over 80 this week, then Jan23 70Ps look nice to me