Hey Traders,
Today I want to talk to you about a trade we made during Christmas week — a fragmented, low-volume week where big moves aren’t always a given.
If you’ve been trading for any length of time, you know holiday weeks can bring their own challenges. Low volume can sometimes lead to outsized moves, but just as often, the market might stay quiet or move unpredictably.
That’s why I like to focus on trades that take advantage of high-probability setups without needing a massive market rally to succeed.
Last week — Christmas week — AVGO was the perfect candidate.
The Setup: High Yield in Just 3 Days
On Tuesday, December 24th, I put out this trade:
- Sell to open AVGO 222.50 Put (expiring Friday)
- Buy to open AVGO 12/27/2024 220 Put (expiring Friday)
We entered the trade with a net credit of $0.12. With a $2.50 difference in strike prices, this gave us a potential yield of 4.8% in just three days — as long as AVGO stayed above $222.50 through Friday’s close.
When I sent out the alert, AVGO was trading around $236.40 — already well above our strike price. And with its recent bullish trend, the odds were stacked in our favor.
How the Week Played Out
Tuesday (Christmas Eve)
Markets closed early, but AVGO managed to climb throughout the half-day session after a brief dip in the morning. A good start for our trade, as the stock showed resilience and stayed well above our strike price.
Wednesday (Christmas Day)
Markets were closed, so the stock didn’t move at all.
Thursday (Post-Holiday Trading)
This is where AVGO shined. It climbed steadily throughout the full trading day, moving from $239 to $245 in just 1 trading session. By this point, the trade looked rock-solid.
Friday (Expiration Day)
Here’s where things got interesting. AVGO opened sharply lower, dropping nearly 3.5% — down as low as $236.30 — in the first half hour of trading. That’s lower than the price we entered the trade at!
For some traders, this kind of volatility would have been nerve-wracking.
But because we used a credit spread instead of buying call options, we didn’t need AVGO to hit some far-off price target.
All we needed was for it to stay above $222.50 by Friday’s close. And that’s exactly what happened.
After the morning dip, AVGO rebounded strongly and climbed throughout the day, closing near $242.
Our short put expired worthless, and we walked away with the full 4.8% yield in just three trading days.
The Power of Credit Spreads
Here’s why this trade worked so well, even in a fragmented week where the stock had modest overall gains of about 1.02% by week’s end:
- We Didn’t Need a Big Move
If we’d bought call options, we would have needed AVGO to climb significantly — enough to overcome the time decay that eats away at options premiums. But with a credit spread, all we needed was for AVGO to stay above $222.50. - We Took Advantage of the Trend
Even in a choppy market, AVGO’s recent bullish trend gave us confidence to set up this trade. By using a credit spread, we aligned with that trend while giving ourselves a buffer zone. - We Profited from “So-So” Movement
While AVGO had its ups and downs, its net gain for the week was small compared to its movements within the week. With a credit spread, we didn’t need it to hit a home run. We just needed it to stay in the ballpark — and it did.
The Takeaway
Holiday weeks can be tricky. Markets are quieter, and stock movements can seem erratic. But with the right strategies, you can turn even a fragmented, low-volume week into a solid win.
The AVGO trade is a perfect example of how this strategy gives us the flexibility to profit from small moves, sideways action — or even downward moves in the stock.
If you’ve been waiting for the perfect time to start trading this strategy, this is your sign.
Another powerhouse stock — is going to be making a huge announcement next week — and no matter how the stock moves, this is how I plan to trade it.
Here’s to more wins, more learning, and a strong year ahead.
Trade well,
Jack Carter
