AVGO Analysis

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.

Premium: $12.11 Expire OTM  
AVGO-iron fly Strike Odds Delta
Long 260.00 92.2% 9
Break-even 247.11
Short 235.00 50.7% 52
Short 235.00 49.5% 48
Break-even 222.11
Long 210.00 93.0% 6

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

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