AVGO Trade Recap: Navigating the Holiday Week Volatility

Hey traders,

As we wrap up this fragmented trading week, I wanted to give a final update on our AVGO trade.

Earlier this week I wrote a couple of pieces about why I traded AVGO to the downside last week and why I chose to do it again this week.

To recap, last week I spotted a temporary weakness in AVGO and decided to take a bearish trade, even though the broad market — and AVGO itself — has been fairly bullish.

Last Tuesday, we sold the 1735 call and bought the 1740 call, creating a credit spread that would profit as long as AVGO stayed below 1735.

That strategy paid off, without much excitement.

Last week AVGO was flat-to-down from where we got into the trade and with the trade closing automatically last Friday, we kept the full premium and logged an easy win.

This week, as I described in Wednesday’s video, I saw more signs that pointed to continued weakness in AVGO, so I decided to play it to the downside again.

With AVGO around 1630, we sold the 1730 Call and bought the 1735 call, betting that AVGO would be below 1730 by today’s close.

And remember, with only a half day of trading on Wednesday and markets completely closed on Thursday for July 4th, we were basically only risking 2½ days or less in the trade.

Well, this week AVGO did give us a little bit of excitement, as it rose steadily through Tuesday’s session. And then on Wednesday it spiked nearly a full 4%, just barely touching the strike price that we sold.

By today’s today, it tried to keep going up, but as I had expected, it was completely unsustainable.

The stock has retraced as much as 3.5% today where it currently sits at 1705 — and with less than 30 minutes left in the trading day as I write this, it looks like we’ll be closing out with another winner and keep the full premium we collected.

Holiday weeks often bring some unique challenges and opportunities.

Whether it’s a shortened week that starts on a Tuesday or ends on a Thursday, or a fragmented week like this one with a mid-week break, volatility is usually a factor.

But this volatility is usually not sustainable due to lower trading volumes, as many traders take time off.

This week was a perfect example. The brief spike in AVGO on Wednesday showed the kind of temporary volatility that can happen during holiday weeks.

But as I expected, it was unsustainable, and AVGO retracted back down once the market reopened.

This trade was a great reminder of the importance of staying adaptable and keeping a close eye on market conditions.

While we typically trade in the direction of the broad market, recognizing and acting on short-term weaknesses can lead to good trading opportunities.

Keep an eye out… I’ve been talking a lot about AVGO for a reason…

See, next week, AVGO is doing a 10-for-1 split… but the opportunity isn’t in the new, lower stock price.

I’ll be talking all about it Wednesday, July 10th @ 1pm Eastern! Click here to get more info and reserve your spot!

Trade well,

Jack Carter

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