Broadcom Stock Option Trade: Profit From Volatility, Sector Rotation With This Butterfly Spread Strategy

Blockhead09-07

Today, let's consider the post-earnings trade strategy for Broadcom (AVGO) by combining two butterfly options trades. The trade structure in Broadcom stock involves both a long call butterfly and a ...

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The trade structure in Broadcom stock involves both a long call butterfly and a ...</p>\n\n<a href=\"https://www.investors.com/research/options/broadcom-stock-today-volatility-butterfly-spread/\">Source Link</a>\n\n</div>\n","source":"investor_business_daily_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Broadcom Stock Option Trade: Profit From Volatility, Sector Rotation With This Butterfly Spread Strategy</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBroadcom Stock Option Trade: Profit From Volatility, Sector Rotation With This Butterfly Spread Strategy\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-07 01:47 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.investors.com/research/options/broadcom-stock-today-volatility-butterfly-spread/><strong>Blockhead</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Today, let's consider the post-earnings trade strategy for Broadcom (AVGO) by combining two butterfly options trades. The trade structure in Broadcom stock involves both a long call butterfly and a ...</p>\n\n<a href=\"https://www.investors.com/research/options/broadcom-stock-today-volatility-butterfly-spread/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IE00BKDWB100.SGD","symbol_name":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","start_time":0,"source_url":"https://www.investors.com/research/options/broadcom-stock-today-volatility-butterfly-spread/","article_id":"2465646984","we_media_id":null,"thumbnails":["https://www.investors.com/wp-content/uploads/2017/12/Broadcom-broadband-chips-150x150.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2465646984","pubTimestamp":1725644843,"sourceInfo":{"source_id":"investor_business_daily_highlight","name":"Investor’s Business Daily"},"weMediaInfo":null,"summary":"Price support for Broadcom stock sits near 130.","collect":0,"end_time":0,"defaultTopTitle":"investors.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BKDWB100.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","IE00BKPKM429.USD":"NEUBERGER BERMAN GLOBAL SUSTAINABLE EQUITY \"A\" (USD) ACC","IE00BZ1G4Q59.USD":"LEGG MASON CLEARBRIDGE US EQUITY SUSTAINABILITY LEADER \"A\"(USD) INC (A)","IE00B19Z9Z06.USD":"Legg Mason ClearBridge - US Aggressive Growth A Acc USD","BK4554":"元宇宙及AR概念","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","BK4515":"5G概念","LU0345769128.USD":"NINETY ONE GSF GLOBAL EQUITY \"A\" (USD) ACC","LU0889565833.HKD":"FRANKLIN TECHNOLOGY \"A\" (HKD) ACC","LU0861579265.USD":"联博低波幅策略股票基金A","LU0444971666.USD":"天利全球科技基金","IE00BMPRXQ63.HKD":"NEUBERGER BERMAN NEXT GENERATION CONNECTIVITY FUND \"A\" (HKDHDG) ACC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","LU0203347892.USD":"SCHRODER ISF QEP GLOBAL ACTIVE VALLUE \"A\" (USD)  INC AV","IE00B894F039.SGD":"Legg Mason ClearBridge - US Aggressive Growth A Acc SGD-H","BK4588":"碎股","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0345769631.USD":"NINETY ONE GSF GLOBAL EQUITY \"A\" (USD) INC","LU0943347566.SGD":"安联收益及增长平衡基金AM H2-SGD","LU0320765646.SGD":"FTIF - Franklin Income A MDIS SGD-H1","BK4566":"资本集团","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","IE00B5949003.HKD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A\" (HKD) ACC","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU0476273544.USD":"CT (LUX) I GLOBAL TECHNOLOGY \"BU\" (USD) ACC","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC","IE00BLSP4452.SGD":"Legg Mason ClearBridge - Tactical Dividend Income A Mdis SGD-H Plus","IE00BLSP4239.USD":"Legg Mason ClearBridge - Tactical Dividend Income A Mdis USD Plus","IE00B19Z9P08.USD":"LEGG MASON CLEARBRIDGE US AGGRESSIVE GROWTH \"A\" (USD) INC","AVGOP":"BROADCOM INC PFD SER A 22","LU0868494617.USD":"UBS (LUX) EQUITY SICAV - US TOTAL YIELD SUSTAINABLE \"P\" (USD) ACC","BK4141":"半导体产品","LU0234570918.USD":"高盛全球核心股票组合Acc Close","AVGO":"博通","LU0417517546.SGD":"Allianz US Equity Cl AT Acc SGD","LU0170899867.USD":"EASTSPRING INVESTMENTS WORLD VALUE EQUITY  \"A\" (USD) ACC","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","BK4551":"寇图资本持仓","IE00BBT3K403.USD":"LEGG MASON CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A(USD) ACC","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","IE00BN8TJ469.HKD":"FTGF CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A\" (HKD) INC","IE00BK4W5M84.HKD":"HSBC GLOBAL FUNDS ICAV US EQUITY INDEX \"HC\" (HKD) ACC","BK4581":"高盛持仓","IE00BK4W5L77.USD":"HSBC GLOBAL FUNDS ICAV US EQUITY INDEX \"HC\" (USD) ACC","LU0868494708.USD":"UBS (LUX) EQUITY SICAV - US TOTAL YIELD SUSTAINABLE \"P\" (USD) INC","BK4512":"苹果概念","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","IE00BJLML261.HKD":"HSBC GLOBAL EQUITY INDEX \"HCH\" (HKD) ACC","IE00BMPRXN33.USD":"NEUBERGER BERMAN 5G CONNECTIVITY \"A\" (USD) ACC","LU0234572021.USD":"高盛美国核心股票组合Acc"},"translate_title":"博通股票期权交易：通过这种蝴蝶价差策略从波动性、板块轮动中获利","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AVGOP":1,"AVGO":1},"content_text":"Today, let's consider the post-earnings trade strategy for Broadcom (AVGO) by combining two butterfly options trades. The trade structure in Broadcom stock involves both a long call butterfly and a long put butterfly.\n\n\n\n↑\nX\n\n\n\n\nHow To Make Tough Trading Decisions: Anne-Marie Baiynd\n\n\nSee All Videos\n\n\n\n\nNOW PLAYING\nHow To Make Tough Trading Decisions: Anne-Marie Baiynd\n\n\n\n\nTwo things to consider in this trade. First, Broadcom stock is up over 60% over the last twelve months, even after Friday's sharp sell-off. Second, the chip sector has fallen amid sector rotation. This environment could deliver a fair bit of weakness after the bounces in price occur off an \"earnings fade.\" \nPut another way, such action gives us two-way motion and another visit to the options butterfly garden.\nAlso, the latest U.S. employment numbers have given us the customary gyrations in the month of September. \nRemember, intraday volatility is quite high historically this month. So, having patience in entering trades will serve your returns well. \nAs always, we assume that we don't know the direction of either Broadcom stock or the market. But we are able to estimate the magnitude of the move using the ATR (average true range) on the weekly chart. We also check the implied moves that market makers have priced into the move in Broadcom stock in the months ahead.\n\nBroadcom Earnings: A Disappointing Sales Outlook\n\nBroadcom Stock Today: The Setup\n\nLet's first discuss the long call butterfly in Broadcom stock. We position it so the 'long wing' of the trade gives us a likelihood of returns. We use the short wing to finance part of the trade.\nTechnically, the long call butterfly comprises of a long call spread (a bullish position) and a short call spread (a bearish position) that share the middle strike:\n\nBuy to open 1 AVGO Oct. 18 155-strike call\nSell to open 2 AVGO Oct. 18 165 calls\nBuy to open 1 AVGO Oct. 18 175 call\n\nThe call butterfly above will cost approximately $1.50, based on recent trading. This is also the maximum loss for this position, or $150 per set of calls. It makes the max profit $8.50 (outside of commissions). Total profits will begin to erode if Broadcom stock stays above 165. \nHow about the long put butterfly? We position it so the 'long wing' of the trade gives us a likelihood of returns. The short wing finances part of the trade. In a long put butterfly, combine a long put spread (a bearish position) and a short put spread (a bullish position).\nBoth spreads share the middle strike as follows:\n\nBuy to open 1 AVGO Oct. 18 135 put\nSell to open 2 AVGO Oct. 18 125 puts\nBuy to open 1 AVGO Oct. 18 115 put\n\nThe put butterfly above will cost $0.73 (the max loss for this position), resulting in a max profit of $9.27 (outside of commissions). Total profits will begin to erode if AVGO stays below 125. \nIf we take both sides of these trades, we court a maximum exposure of around $2.23. And this opens room for a potential profit in Broadcom stock all the way to $7.77, or $777 per spread position. \nDefending The Trade\nStock hunting using fundamental and price strength within the IBD methodology is where I firmly plant myself under the backdrop of the current economic backdrop. I use technical analysis to find ideal buying opportunities in conjunction with the tools for strength seen on IBD.\nThe goal of taking the unbalanced butterflies like the one above? Take advantage of higher implied volatility as the undercurrent of markets shift influences traders to participate in an outsized move.   \nLooking at key chart levels, relative resistance to the upside in Broadcom stock sits right around 167. That price level looks likely to bring sellers if rotation continues. \nKey Price Levels\n\nMeanwhile, price support for Broadcom stock sits near 130. That should bring buyers to the chart if dip-buying is still on the table. \nThe strategy result provides three choices to exit the trade in Broadcom stock. One, sell both butterfly spreads once the middle strike of either spread is tested. This means we look at setting an alert for 165 and for 125. Why? We are looking for either butterfly to deliver the positive results we are looking for here.\nTwo, sell the spreads once it hits your loss threshold as determined by personal risk. This will happen with extreme price movement. Three, sell the first spread that hits its middle strike and leave the opposing spread to recover if market gyrations continue. \nYou may also sell the spreads into the week before expiration, if all is going well and you have decided to hold the trade into closer to the end of expiration. Yet I have had many a trade go sideways taking it down to the wire and not capturing gains, so I do not advise this.\nAnne-Marie Baiynd is a 20-year veteran trader of stocks, options and futures and is the author of \"The Trading Book: A Complete Solution to Mastering Technical Systems and Trading Psychology.\" She holds no positions in the investments she writes about for IBD. You can find her on  X at @AnneMarieTrades\nYOU MIGHT ALSO LIKE:\nInside IBD Big Cap 20\nFind The Best Growth Stocks Via This Highly Stringent Screen\nWant More Options Trading Strategies? Go Here\nWhy The 21-Day Exponential Moving Average Matters\nHere's The Latest IBD Podcast","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.26.4","shortVersion":"4.26.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2465646984"}