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Broadcom reports earnings this week. Mike Khouw says this trade could be a winner
CNBC • • business
Key Points:
- Broadcom's market capitalization is approximately $1.75 trillion, making it larger than companies like Tesla, SpaceX, Eli Lilly, and JPMorgan, though it receives less attention than peers like Nvidia.
- Broadcom is set to report its Q3 earnings soon, with high stakes following a disappointing Q2 report that led to significant share price declines and lingering market skepticism.
- The company's Q2 earnings fell short of raising its 2027 AI revenue target, contributing to negative investor sentiment and elevated implied volatility in options trading.
- Technically, Broadcom is consolidating below its 150-day moving average but shows signs of building momentum, presenting a moderately bullish opportunity for options traders through a strategic put and call spread trade.
- The proposed options strategy aims to capitalize on elevated premiums and potential post-earnings volatility crush, though risks remain if forward AI guidance disappoints again, possibly leading to stock purchase at a discount.
