AVGO Options Signal $340 Call Contention: Bullish Breakout or Bearish Trap?

• AVGO surges 2.7% to $338.90 as RSI hits oversold 25.4, hinting at potential rebound
• $340 call OI spikes to 12,557 (this Friday) while $300 put OI nears 17,412, showing bear/bull tug-of-war
• $73B AI backlog and 10% dividend hike fuel optimism, but margin pressures linger

The options market is locked in a high-stakes chess match around Broadcom’s $340 level. With 12,557 open contracts betting on a push above this price (this Friday’s $340 calls) and 17,412 puts bracing for a $300 collapse, the data screams of a pivotal inflection point. Let’s unpack why this $340 threshold could be the key to unlocking AVGO’s next move.

The $340 Call Contention: A Battle for Bullish Control

The OTM call options at $340 and $350 (this Friday) are the most watched, with combined open interest of 41,921 contracts. This suggests institutional players are hedging for a short-term rebound, possibly targeting the 30-day support/resistance cluster between $339.93–$341.67. Meanwhile, the $300 put OI (17,412) reflects deep-seated bearishness, though its distance from current price ($338.90) implies a worst-case scenario play rather than immediate fear.

The MACD (-4.64) and RSI (25.4) both scream oversold conditions, but the histogram’s -8.62 reading warns of lingering bearish momentum. This creates a paradox: technicals hint at a rebound, but options data shows caution. The $340 call wall could act as a catalyst if price breaks above the 200-day MA ($338.30), but failure to hold above $339.93 might trigger a test of the $318.50 Bollinger Band low.

AI Backlog and Dividend Hike: Fuel for the Bull Case

Broadcom’s $73B AI backlog and 10% dividend increase (to $0.65/share) are major tailwinds. The recent $10B Anthropic order and 74% YoY AI revenue growth validate its dominance in the XPU and networking space. Yet the stock’s 19.7% drop from its 52-week high ($414.61) to $326.02 on Dec 18 shows valuation concerns are real. Analysts remain bullish (85% “Strong Buy”), but the forward P/E of 44.68x and 42.33% debt-to-capital ratio mean volatility isn’t going away.

Actionable Trade Ideas: Calls, Puts, and Precision Entries

1. Bullish Call Spread: Buy AVGO20251226C340 (next Friday’s $340 call, OI: 9,997) if price breaks above $339.93. Target: $345–$350 (aligns with 30D MA at $366.14). Stop-loss below $333.02 intraday low.
2. Bearish Put Spread: Buy AVGO20251226P330 (next Friday’s $330 put, OI: 10,257) if price closes below $333.02. Target: $320–$318.50 (Bollinger Band floor). Stop-loss above $341.67 resistance.
3. Stock Entry: Consider buying AVGO at $338.29–$338.30 (200D MA support) with a $341.67 take-profit target. Use $333.02 as a hard stop.

Volatility on the Horizon: A Tightrope Walk

The next 72 hours will be critical. A close above $341.67 could trigger a surge in call buying, while a drop below $333.02 might see puts dominate. The $340 call wall acts as both a potential catalyst and a trap—break it with conviction, and the 30D MA at $366.14 becomes a new target. But hesitation here could invite a retest of the $318.50 level. For options traders, the key is to align with the direction of the 200D MA ($338.30) and manage risk tightly. This isn’t a high-odds bet—it’s a high-reward setup for those who can read the room.