AVGO Call Spread Delivers 6.6% Gain as Stock Rises $10.28—But Option Skew Flashes Caution
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If you blinked this morning, you may have missed a notable options move on Broadcom (AVGO): a large call spread traded 1,472 contracts, quickly notching a 6.6% gain as the stock price broke above its resistance level. What does this mean for AVGO's outlook, and what do the option market signals really say?
Big AVGO Call Spread—Gain Driven by $10.28 Stock Jump
This morning, a sizable call spread trade on AVGO caught attention for both its volume and its swift profitability. Here are the key stats at a glance:
| Trade Detail | Value |
|---|---|
| Expiration Date | 09-Jan-26 |
| Strike Prices | 337.5-340 Call Spread |
| Contracts Traded | 1,472 |
| VWAP Trade Price | 2.09 |
| VWAP Price at 11:20am | 2.23 |
| Average Gain per Spread | 0.14 (6.6%) |
| Stock Reference Price at Trade | 334.65 |
| Stock Price After Jump | 344.93 |
This means the spread buyers spent $154,000 to position for a potential maximum profit near $30,000—so long as AVGO closes above $340 at expiration. For those wanting to explore the full trade breakdown, here’s a multi-leg trade analyzer link.
Strategy Insight: Tight Spread, Defined Risk, and Quick Profitability
Let’s break down why this trade may be appealing for some traders. The vertical call spread (337.5–340 strikes) locks in defined risk—the maximum anyone could lose is the premium paid (~$2.09 per spread, or $209 per contract), while the potential gain ($30,000 max for this trade) is capped at the spread width minus the premium. Because AVGO shares spiked $10.28 from the reference price, buyers saw the spread’s value rise by 0.14 almost immediately.
However, for the trade to reach its maximum profit, AVGO must remain above $340 at expiration. This is a classic bullish, but less aggressive, play, likely anticipating either a mild rally or at least stability above the $340 level in the near future.
Stock Technicals: Bearish Crossover and Short-Term Underperformance
Looking at the technical backdrop, AVGO closed the session at $344.93, up 3.74% for the day (a $12.45 gain), and handily broke through its expected daily resistance of $341.62. However, it’s not all sunshine: the stock still sits 16.8% below its 52-week high and just below key moving averages—the 20-day and 50-day moving averages are currently above the price, with the recent move still not reversing a bearish crossover.
| Technical Indicator | Value |
|---|---|
| Current Stock Price | 344.93 |
| Price vs. 52-Week High | -16.8% |
| 20D vs. 50D Moving Avg | -3.0% |
| Price vs. 20D Moving Avg | -1.5% |
| Price vs. 50D Moving Avg | -4.5% |
AVGO has outperformed the S&P 500 (SPY) by a wide margin over the past year, yet underperformed over recent weeks and months. Here’s an at-a-glance performance comparison:
| Duration | AVGO Return | SPY Return | AVGO Low | AVGO High |
|---|---|---|---|---|
| Today | +3.7% | +0.5% | 333.50 | 346.07 |
| 2 Week | -1.5% | +0.4% | 330.50 | 360.66 |
| 1 Month | -13.8% | +1.7% | 321.42 | 414.61 |
| 3 Month | 0.0% | +3.3% | 321.42 | 414.61 |
| 6 Month | +27.4% | +12.4% | 269.58 | 414.61 |
| 1 Year | +51.5% | +18.8% | 138.10 | 414.61 |
| YTD | -0.3% | +1.7% | 330.50 | 360.66 |
| 3 Year | +497.2% | +84.0% | 55.00 | 414.61 |
| 5 Year | +695.7% | +90.5% | 41.51 | 414.61 |
Option Skew Indicator: 21% Rank Signals Bearish Market Posture
Despite today’s strong move and the recent call spread profitability, option market sentiment seems less optimistic for AVGO going forward. The 30-day implied volatility skew ranks just 21% (on a 0-100 scale), indicating a bearish reading versus the past year. This proprietary indicator suggests traders might be hedging or bracing for further downside—or at the very least, lacking conviction for a near-term upside surge.
Takeaway: Tactical Bet Amid Mixed Signals
The large call spread trade on AVGO today highlights a tactical strategy: seeking limited, defined gains in a stock that’s shown both strong long-term growth and recent stumbles. With technicals flashing warnings and the option skew leaning bearish, this trade could be either a low-cost bullish bet or a calculated hedge.
If you want to look for more multi-leg strategy ideas like this, check out the Market Chameleon Multi-Leg Option Trades Screener for real-time opportunities.
What will happen next? While we can't predict, today's trade shows how pros are creatively navigating mixed signals in AVGO. For anyone considering strategies of their own, keep an eye on technical, sentiment, and options signals before making the jump.
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