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broadcom ticker symbol avgo had a stock split today 1041 meaning for every share of broadcom it is now 10 shares but the stock price has been divided by 10 you can see now it is a $100 stock instead of a $1,000 stock so the value has not changed so is it a good time to buy broadcom or sell broadcom in this video we will analyze the data of unusual option activity which represents the trades of wealthy investors are they bullish and buying broadcom after the split or are they bearish and selling so that we can also trade in the same direction to make money while the rich are getting richer on Wall Street because as we all know the rich have more access to information to make better financial decisions so without further Ado let's dive into this data and then show how we are trading broadcom based on this data on the option time in sales tape we can see 1,500 contracts being traded at the same time for these August 16 options at the 170 strike puts and the 170 strike calls now let's take a deeper look at the chain to find out more at the 170 strike calls and puts now notice that the open interest for every single option is zero and that is what happens after the split because these strike prices are much lower now because of the 10 for one split and so prior hand nobody was trading these strike prices and that is why there is zero open interest and so we know that every option trade today is an opening trade and we can see at the 170 strike calls there were 4,000 contracts being traded at the volume and at the put side we had 2,000 contracts being traded and based on our analysis we believe that they were selling the 170 strike puts using this credit and buying the 170 strike calls okay and so when we Analyze This trade can see that this trade is a bullish long trade because as the the price of Brom on the x axis goes up you can see this is a positive gain here these options if it goes down it is a negative loss because here on the Y AIS this is the profit loss here and zero is the break even line okay so this is a long synthetic strategy here and we can see that it has a positive Delta so we know that this is a bullish long trade if it was a short bearish trade it would be a negative Delta now keep in mind because they sold the 170 strike puts essentially saying they're willing to own a 100 shares of Brom at the strike price and so the buying power required to put on this trade is $117,000 selling these puts like a cash secured put and since they did 1,500 contracts we know that this investor needed $25.5 million and that is why we know that this is a wealthy investor that is trading this okay now even though this is a 25.5 million trade because this is a very large market cap company and and because it is right after the split where many investors are repositioning their options strike prices this is actually a lower chance of profit trade so if you want a higher chance of profit trade then make sure to go to our website where we share the trades of wealthy investors using this type of analysis and also our options strategies we'll put a link at the top here where you can learn how to gain access to more of these types of Trades but with a higher chance of profit in comparison to this one here on broadcom now based on this data that is going long bullish how did we trade broadcom so let's take a look at the chain and we can show our option strategy here you can see we also traded the August 16 options our position over here at the 180 strike calls over here POS for position it is a green because we are buying the 180 strike calls but we are also selling another call option over here at the 200 strike calls you can see here this is red because we are selling these and so by selling these these you can see our trade strategy over here this is a vertical call spread each of our trades cost $340 of debit and you can see that over here currently trading at 171 yif broadcom goes up this is a positive gain profit you can see the blue line here is our Max profit it shows up over here and expiration $1,660 per trade so we have a very favorable risk reward ratio here because 1,660 is our reward divided by our risk which is the cost of this trade 340 of debit you can see our risk to reward ratio is 4.8 meaning we could potentially make 488 per profit okay so that's one of the ways that we make sure our strategies are in our favor but be aware of the risk of trading this type of strategy because notice how the break even is right over here where it meets the zero profit loss line and this share price is actually about $183 per share so broadcom has has to trade above 183 at expiration August 16 for these options to be profitable because it decays in value you can see this purple line will actually drop down and so if we are trading below 183 you can see that the blue line is actually a negative okay so the risk on this option strategy is this very high Theta Decay of6 every day that goes by these options will lose value so be aware of this risk if you are trading options especially this strategy there are other strategies that we use that have a higher chance of profit because they are lower risk if you are interested in those then make sure to go to our website where we share the traits of wealthy investors in order to maximize profits and that is how we are able to beat the market consistently let us know in the comments below what do you think will happen to broadcom do you think it will go up higher or down lower as usual please smash the like button subscribe if you haven't take care and have a great day
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