Broadcom (AVGO) shares have been climbing steadily, recently hitting an all-time high following the announcement of a major advancement in its data center switch chip technology, CNBC reports.
With the company set to report earnings in the coming days, investors are exploring ways to navigate the heightened volatility using options strategies.
The tech company has seen its stock rise sharply—over 75% since early April—buoyed by strong market sentiment around artificial intelligence infrastructure. Broadcom recently revealed it is now shipping a new generation of data center switch chips, which the company claims deliver the power of six previous chips at twice the cost, approximately $20,000 each.
While Nvidia often dominates AI-related headlines for its leading GPUs, Broadcom plays a critical supporting role by enabling efficient communication between those chips. Improved network performance means better GPU utilization—an area where Broadcom’s technology could have significant impact.
This technological strength is reflected in the company’s valuation, with a forward earnings multiple of 39x, near historical highs. Analyst sentiment is overwhelmingly bullish, with 46 buy ratings, according to Bloomberg.
With the stock soaring into earnings season, investors are looking for strategies to manage potential downside risks or gain exposure without committing fully to buying the shares outright.
For shareholders seeking protection, a put spread collar offers a way to hedge:
Buy AVGO July 11 $250 put
Sell AVGO July 11 $225 put
Sell AVGO July 11 $300 call
This strategy helps limit losses below $250, while capping gains above $300—a practical tradeoff in a high-volatility environment.
For those not currently holding the stock but looking to position for a potential upside move, a call spread risk reversal is one approach:
Buy AVGO Sept. 19 $260 call
Sell AVGO July 18 $220 put
Sell AVGO July 18 $310 call
This setup mimics the risk-reward profile of owning the stock, with defined downside protection and capped upside. Extending the expiration of the long call leg effectively creates a calendar spread, which may benefit from time decay differences if the stock remains volatile through the summer.
Broadcom’s momentum has been supported not only by its own innovation but by broader trends. Meta’s recent 20-year agreement to purchase nuclear energy for AI infrastructure underscores the long-term investment cycle in data-heavy technologies. This signals continued capital expenditure in AI-related infrastructure—a space where Broadcom plays a key role.
