Broadcom Ltd. (AVGO)
Update 6/2/2017: AVGO gapped sharply to the upside and remained high. With expiration only a week away, I judged that there was little chance of the position improving and I took the loss.
Shares rose by 4.8% over one day, or a +1,764% annual rate. The options position produced a -2.3% loss on debit for a -854% annual rate.
AVGO publishes earnings on Thursday after the closing bell.
I shall use options that trade for the last time eight days hence, on June 9.
Implied volatility stands at 33%, which is 3.3 times the VIX, a measure of the volatility of the S&P 500 index.
AVGO’s IV stands in the 64th percentile of its annual range and the 97th percentile of its most recent broad movement.
The price used for analysis was $235.25.
The premium is 48% of the width of the position’s wings.
The risk/reward ratio is 1.1:1.
Decision for My Account
I have entered an order on AVGO as described above. The stock at the time of entry was priced at $235.26.
By Tim Bovee, Portland, Oregon, June 1, 2017