AVGO Analysis

Broadcom Ltd. (AVGO)

AVGO publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Sept. 1.

Implied volatility stands at 40%, which is 3.3 times the VIX, a measure of the volatility of the S&P 500 index.

AVGO’s IV stands in the 78th percentile of its annual range and at the peak of its most recent broad movement.

The price used for analysis was $254.82.

Premium: $14.50 Expire OTM  
AVGO-iron fly Strike Odds Delta
Long 282.50 91.6% 10
Break-even 269.50 ~77.0% ~25
Short 255.00 51.5% 52
Short 255.00 48.6% 48
Break-even 242.00 ~71.0% 26
Long 227.50 88.7% 10

The premium is 52.7% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

The expected move is $12.45, within the break-even width.

Decision for My Account

I am passing on this trade. It’s an excellent structure. But the price of a single contract is greater than I prefer. My motto: Trade small, trade often. AVGO’s price isn’t quite small enough for my taste.

By Tim Bovee, Portland, Oregon, Aug. 24, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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