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Broadcom Corporation hasn't traded north of $45 since February 2011
Similar to sector peer Micron Technology, Inc. (NASDAQ:MU), Broadcom Corporation (NASDAQ:BRCM) tagged a fresh technical milestone today -- hitting $43.14 for the first time in more than three years. At last check, the stock was sitting just below this mark, at $43.12 -- prompting option traders to roll the dice on a move to new multi-year highs over the next two months.
Taking a quick step back, calls are crossing the tape at a rate four times what's typically seen at this point in the day, and are outpacing puts by a 6-to-1 margin. More than two-fifths of the day's call volume has centered on BRCM's January 2015 45 strike, where 13,407 contracts have traded -- mostly at the ask price, hinting at buyer-driven activity. Implied volatility is up 2 percentage points, and volume outstrips open interest, making it safe to assume a fresh batch of bullish bets is being initiated.
Based on the volume-weighted average price (VWAP) of $0.85, the call buyers' profits will accrue on a move north of breakeven at $45.85 (strike plus VWAP) -- territory not charted by BRCM since February 2011. Losses, meanwhile, are limited to the initial premium paid, should the stock settle south of the strike at January options expiration -- a time frame which includes the company's annual analyst day, slated for Tuesday, Dec. 9.
Widening the sentiment scope reveals today's bullish bias is just more of the same for a stock that's rallied more than 45% year-to-date. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), specifically, BRCM's 10-day call/put volume ratio of 25.98 ranks in the 98th percentile of its annual range. In other words, Broadcom Corporation (NASDAQ:BRCM) calls have been bought to open over puts at a faster pace just 2% of the time within the past year.