The risk-reward balance in AVGO is too good to ignore. Trading it with options
While the much-anticipated year-end rally appears to be losing steam, market volatility remains surprisingly compressed. With the VIX hovering at historically low levels, I view substantial pullbacks not as warnings, but as strategic “buy the dip” opportunities. Broadcom (AVGO) fits this bill perfectly. Between Dec. 10 and 17, the stock plunged 22% — its sharpest decline since 2020. Since that capitulation, the stock has been gradually regaining its footing, offering a compelling entry for patient traders. To time this entry, I am analyzing three distinct technical signals: Custom MACD (5, 13, 5) Using my tuned, faster MACD settings, we spotted a momentum shift early. A bullish crossover triggered on Dec. 23, providing a “heads-up” signal well before the broader market recognized the stabilization. RSI (Relative Strength Index) The momentum picture is improving. After skirting oversold levels, the RSI found a bottom and has been trending higher since Dec. 18, confirming that buying pressure is slowly returning. The DMI Warning However, the Directional Movement Index (DMI) advises some caution. The DI- line (representing bearish pressure) is showing a slight uptick. Because this indicator hasn’t given a full “all-clear” signal yet, I am approaching this trade with a bit more conservatism than usual. If you are interested in following an emotionless trading system built on these principles, please check out TradeWithMaya where my CNBC readers get a special 50% discount for three months. The trade setup: AVGO 345-350 bull call spread Despite the mixed signal from the DMI, the risk-reward ratio here is too good to ignore. I am structuring this as a bull call spread to maintain capital efficiency while strictly defining my risk. We are targeting an entry price of approximately $250 per spread. We achieve maximum profit on this trade if Broadcom simply closes at or above $350 by expiration. Given the aggressive strikes and the lack of full DMI confirmation, I am entering a limit order that may not fill immediately. It might take a day or two for the price to come to us, but patience is key when fighting a lingering bearish trend. Here is my exact trade setup: Buy $345 call, Jan. 30 expiry Sell $350 call, Jan. 30 expiry Contracts: 1 Cost: $250 Potential Profit: $250 -Nishant Pant Founder: https://tradewithmaya.com/ Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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