AVGO | Broadcom Limited | Options Trade Idea Ahead Earnings

AVGO Options Trade Idea

image of broadcom logoBroadcom Limited (AVGO), Broadcom Limited designs, develops, and supplies a range of complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. AVGO reports earnings on June 1, 2017 let us look at a strategy to capitalize on the earnings report.

image of AVGO stocks trading chart

AVGO Technicals

Technically, the chart looks phenomenal! From the Dynamic Trend Indicator (available on Alphashark.com or email Lance@alphashark.com for link) AVGO meets all the criteria for a long or if already long stay with the trend. The multiple time frame analysis confirms positive momentum with price above the wave. Overhead resistance is at 241.4 which AVGO is knocking on currently on the path to new all-time highs. Usually when a stock is approaching new highs weak hands will try to short it leading to a breakout on volume to new highs as the shorts will have to cover. Remember, we want to be strong hands as smart traders and not fight the trend!

As of May 25, 2017, AVGO is trading at 240 with the expected move for June 8th option expiration is $13.00 I can find the expected move by adding the ATM straddle for the week of expiration.  Therefore, if I add 240 + 13.00 = 253.00 as an upside target for an options play expiring on June 8th expiration.

AVGO Options Trade idea:

I am bullish on AVGO using the Dynamic Trend Indicator with a price target of 253. Therefore, I can develop a trade that will take advantage of my expected move with limited capital requirements. The June 8th expiration 252.50 calls are trading at 2.00 I want to buy these calls for a debit. This strategy is outright bullish with limited risk and unlimited upside. Since I am buying calls for a debit that are slightly greater than the expected move I realize that I think AVGO will move higher than 252.50 + 2.00 (price of the calls) = 254.50 The goal is not to hold these till June 8th expiration, after the earnings release if AVGO is above 254.50 I will look to scale out the calls for profits! Lance Ippolito email: lance@alphashark.com

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