Broadcom Ltd. (AVGO)
Update 12/7/2017: AVGO beat the Street’s expectations by 2.2%.The price rose by nearly $20 in overnight trading but then fell during the day and eventually returned to its starting point. I exited early for a debit of $7.33, with shares at $2679.75, for 13.9% of maximum potential profit.
Zacks had anticipated a small earnings surprise, with an earnings surprise predictor (ESP) score of 0.45 in the context of a bullish rank (2).
The ephemeral upward move post-announcement was in line with the ambiguities of the trend, with a positive direction index (+DI) of 29.2, a negative (-DI) of 16.0 and a weak trend signified by an average directional index (ADX) of 18.4.
Shares rose by 3.3% over the position’s lifespan of less than a day, or a +1,203% annual rate. The options position produced a 16.0% return for a +5,826% annual rate.
The expected move with an 85% accuracy was $13.64, with a $10 profit zone. In actuality the stock closed the first trading day after earnings were published at precisely the same price as it had closed before the announcement.
The overnight swing exceeded post-earnings moves of the past year, which showed an average of $9.98, a maximum of $19.94 and a central tendency of $4.01. The close to close difference, of course, was well within those past ranges.
AVGO publishes earnings on Wednesday after the closing bell.
I shall use options that trade for the last time nine days hence, on Dec. 15.
Implied volatility stands at 38%, which is 3.4 times the VIX, a measure of the volatility of the S&P 500 index.
AVGO’s IV stands in the 81st percentile of its annual range and the 73rd percentile of its most recent broad movement.
You must be logged in to post a comment.