Broadcom [AVGO]
Spot $380.46 (2026-07-28) · 12-month target $603 (+58.5%) · bear $293 (−23.0%)
The memo issues no position verdict. This document sizes and constructs the expression if the book elects to take it, and states what would make it uninvestable.
criteria.md: "Any proposed options structure requires the actual chain pulled first — open interest
and quoted size for the specific strikes and expiry." Pulled from Alpaca 2026-07-28/29.
| Strike | Open interest | Bid | Ask | Bid size | Ask size | Delta | IV |
|---|---|---|---|---|---|---|---|
| 380 | 1,803 | 49.29 | 52.92 | 22 | 11 | 0.555 | 0.540 |
| 400 | 7,202 | 43.66 | 45.00 | 1 | 116 | 0.502 | 0.547 |
| 420 | 3,431 | 35.45 | 38.22 | 32 | 64 | 0.447 | 0.538 |
| 450 | 4,935 | 27.51 | 29.82 | 46 | 62 | 0.373 | 0.537 |
| 500 | 9,437 | 17.77 | 19.05 | 1 | 102 | 0.269 | 0.533 |
| 550 | 2,131 | 11.33 | 12.37 | 28 | 58 | 0.189 | 0.533 |
| 580 | 937 | 8.60 | 10.04 | 40 | 37 | 0.155 | 0.537 |
| Strike | Open interest | Bid | Ask | Delta |
|---|---|---|---|---|
| 400 | 3,856 | 25.54 | 27.43 | 0.433 |
| 410 | 16,694 | 22.53 | 23.33 | 0.394 |
| 440 | 27,100 | 14.49 | 16.32 | 0.294 |
| 470 | 4,028 | 9.02 | 10.81 | 0.210 |
Liquidity Criteria: PASS. Every strike from $350 to $580 in January-2027 carries four-figure open interest with two-sided quoted size. Bid/ask on the $400 strike is $1.34 wide on a $44 premium — 3.0%. This is the opposite of the HCA case (maximum 18 contracts across an entire chain). The equity itself trades a $1.81tn market cap; size is not a constraint at any book-relevant scale.
Three candidates, judged against what the thesis actually is.
1. Long equity. The thesis is a contracted revenue ramp visible over four to eight quarters, not a single dated event. Time works for the holder: each quarterly filing re-discloses committed RPO, so the thesis is re-tested every ninety days at no cost. Equity captures that without paying decay.
2. Jan-2027 $420 calls (delta 0.447, ask $38.22). Captures the $603 target with 2.2x notional leverage per dollar of premium. Breakeven $458.22 — 20.4% above spot, and below the median-multiple target of $458. Costs 10.0% of notional for 172 days. This is the aggressive expression of the same view.
3. Jan-2027 $400/$500 call spread. Long $400 at $45.00, short $500 at $17.77 → net debit $27.23, maximum value $100, maximum payoff 3.67x. Breakeven $427.23 (+12.3%). Caps out at $500, which is below the base target of $603 — so the spread monetises the base case fully and forfeits the bull case. Open interest 7,202 and 9,437 on the two legs; both fillable.
Recommended: long equity as the core, with the Jan-2027 $400/$500 call spread as the incremental expression if the book wants convexity without paying 10% of notional in premium. Rationale: the mechanism is contracted rather than event-driven, so the primary risk is duration of the ramp, not timing of a catalyst — and a defined-risk spread whose cap sits below the base target is the honest way to buy convexity on a thesis you expect to grind rather than gap.
Reject the naked $420 call as the core: at 53% IV a 172-day option needs +20.4% just to break even, and the mechanism does not promise a gap.
Inverse-volatility, per the framework's interim protection on the Downside Criteria.
| AVGO | AMD | MRVL | |
|---|---|---|---|
| 252-day realised vol | 47.2% | 70.0% | 76.9% |
| Jan-2027 ATM implied vol | ~54% | ~74% | ~94% |
| Inverse-vol relative weight (realised) | 1.00 | 0.67 | 0.61 |
Broadcom is the lowest-volatility name in the cluster and simultaneously the only one that passes the Valuation Criteria. Inverse-vol sizing therefore points the same way the analysis does, which is unusual and worth noting: normally the protection fights the conviction.
Concentration constraint, and it is the binding one: AVGO, AMD and MRVL are the same trade. All three are
fabless AI silicon designers selling into the same handful of hyperscaler capex budgets; MRVL's own 10-K
names AMD and Broadcom as direct competitors. They must be sized as one cluster exposure, not three
positions. Correlation of the underlying revenue driver is close to 1 even where the equities diverge.
portfolio_book.json limits apply at the cluster level and are the book's call, not the memo's.
Entry: momentum is the weakest of the three (12-1 = +23.7% versus AMD +199.6% and MRVL +249.7%). Per
criteria.md momentum governs when, never whether. Here it argues for building rather than chasing —
the fundamentally strongest name in the cluster is also the one the market has re-rated least, which is a
reason to scale in rather than to wait.
| Trigger | Action | Rationale |
|---|---|---|
| Committed RPO declines sequentially | Exit | The mechanism is the RPO. If it falls, the PASS WITH ARGUMENT collapses to FAIL — the argument was the RPO. |
| 12-month RPO conversion % falls below 25% | Halve | Conversion has been 35% → 33% → 30%; a further step down means the book is lengthening, not converting. |
| Largest-distributor share exceeds 50% of revenue, or AR concentration exceeds 55% | Halve | The credit exposure starts to dominate the contracted-revenue argument. |
| Non-AI semiconductor revenue turns negative YoY | Reduce | Removes the annuity that justifies any part of the multiple outside AI. |
| Infrastructure software revenue declines YoY | Reduce | At +1% (Q1 FY26) and +9% (Q2) there is no cushion. |
| Price above $713 (own-history 90th-percentile EV/Sales on NTM) | Trim | Above that the multiple, not the business, is doing the work. |
| Price below $293 without an RPO deterioration | Add | That is the p25-multiple level on unchanged fundamentals. |
Stop discipline: there is no price-based stop. The invalidation is a disclosure, and it arrives four times a year on a known date. That is a better stop than a percentage, and it is the reason the equity core is preferred to a dated option.
To be appended to trade_recommendations.jsonl if the book takes the position. Recorded here so the
recommendation is falsifiable either way: