The risk-reward balance in Broadcom is too good to ignore. How to trade the chipmaker with options
Nishant Pant breaks down this bull call spread on AVGO.
TL;DR
- Market volatility is compressed despite a weakening year-end rally, offering 'buy the dip' opportunities.
- Broadcom (AVGO) stock experienced a 22% decline between Dec. 10 and 17, presenting a potential entry point.
- Technical analysis includes a bullish MACD crossover on Dec. 23 and an upward trending RSI since Dec. 18.
- The DMI shows a slight uptick in bearish pressure, suggesting a need for caution.
- A bull call spread trade is recommended: buy $345 call, sell $350 call, both with Jan. 30 expiry, for a cost of $250 per spread.
- Maximum profit is achieved if Broadcom closes at or above $350 by expiration.