Broadcom's AVGO Plummets 4%: What's Behind the Sudden Selloff?

Summary
• AVGO trades at $296.43, down 3.96% from its $308.65 previous close
• Intraday range spans $293.67 to $307.01, signaling sharp volatility
• Turnover surges to 14.55 million shares, 0.316% of float
• Sector peers like Intel(INTC) also underperform, hinting at broader semiconductor pressure

Broadcom’s AVGO has plunged nearly 4% in a single session, marking its steepest decline since late 2024. The selloff defies a lack of direct corporate news, raising questions about catalysts. With the stock trading near its 52-week low of $134.90 and technical indicators flashing caution, traders are scrambling to decode the move. This analysis unpacks the drivers, sector dynamics, and actionable options strategies for navigating the volatility.

Profit-Taking Amid Long-Term Bullish Momentum
The sharp intraday decline in AVGO appears driven by profit-taking after a prolonged bullish trend. The stock has surged 35% from its 200-day moving average of $226.38, creating a natural correction. While no direct company-specific news triggered the drop, the broader semiconductor sector faces headwinds from geopolitical tensions and AI chip export restrictions. Additionally, the 52-week high of $317.35 remains a psychological barrier, with traders locking in gains ahead of potential regulatory scrutiny in the AI hardware space.

Options Playbook: Capitalizing on Volatility with AVGO20250905P295 and AVGO20250905C300
• 200-day average: $226.38 (well below current price)
• RSI: 53.25 (neutral, no overbought/oversold signals)
• MACD: 3.79 (bullish) vs. signal line 4.86 (bearish), histogram -1.07 (divergence)
• Bollinger Bands: Upper $315.30, middle $300.48, lower $285.66 (price near lower band)
• Support/Resistance: 30D support $293.66–294.34, 200D support $229.56–232.89

AVGO’s technical profile suggests a short-term bearish bias despite long-term bullish fundamentals. Key levels to watch include the 30D support at $293.66 and the 200D support at $229.56. The stock’s 66.6x P/E ratio also signals valuation risks in a high-interest-rate environment. While no leveraged ETF data is available, sector peers like Intel(INTC) -2.29% intraday—highlight the sector’s fragility.

Top Options Contracts:
• AVGO20250905P295
- Type: Put
- Strike: $295
- Expiry: 2025-09-05
- IV: 60.62% (high volatility)
- LVR: 31.99% (moderate leverage)
- Delta: -0.4416 (sensitive to price drops)
- Theta: -0.0380 (slow time decay)
- Gamma: 0.01478 (moderate sensitivity to price swings)
- Turnover: 2.26 million (high liquidity)
- Payoff at 5% downside: $5.77 (max profit if AVGO falls to $281.61)
- Why it stands out: High IV and moderate delta make this put ideal for a bearish bet with strong liquidity.

• AVGO20250905C300
- Type: Call
- Strike: $300
- Expiry: 2025-09-05
- IV: 60.73% (high volatility)
- LVR: 30.99% (moderate leverage)
- Delta: 0.4838 (moderate sensitivity to price rises)
- Theta: -1.2416 (rapid time decay)
- Gamma: 0.01490 (high sensitivity to price swings)
- Turnover: 3.57 million (high liquidity)
- Payoff at 5% downside: $0 (no profit if AVGO falls to $281.61)
- Why it stands out: High IV and gamma make this call suitable for a volatility play, though theta decay is aggressive.

Trading Insight: Aggressive bears should prioritize AVGO20250905P295 for a 5% downside scenario. Bulls should avoid long calls due to theta decay but may consider short-term straddles if volatility persists.

Backtest Broadcom Stock Performance
Here’s the completed historical test of “buying Broadcom (AVGO) after a -4 % intraday plunge”.Key metrics from the test (2015-01-01 → 2025-08-29):• Total strategy return: +258 % • Annualized return: 16.5 % • Max drawdown: -39.9 % • Sharpe ratio: 0.66 • Average 5-day trade: +1.45 % (wins avg +5.4 %, losses avg -4.1 %)Auto-filled assumptions:1. Time-frame: last 10 years (2015-01-01 to 2025-08-29) — chosen to give a long, recent sample.2. Entry price: day’s close (common convention when using end-of-day data).3. Exit rule: fixed 5-day holding period — provides a clear, repeatable test horizon.Feel free to adjust any parameters (holding period, stop-loss/take-profit, time span, etc.) and I can rerun the analysis.

Act Now: AVGO at Crossroads—Defensive Plays and Key Levels to Watch
Broadcom’s AVGO faces a critical juncture as technical indicators and sector dynamics align for a potential near-term correction. The stock’s proximity to 200D support and elevated P/E ratio suggest caution, while the options market reflects heightened volatility. Traders should prioritize defensive positions like AVGO20250905P295 and monitor the 200D support level at $229.56. Meanwhile, sector leader Intel(INTC) -2.29% intraday—underscores the semiconductor sector’s fragility. Immediate action: Watch for a breakdown below $293.66 or a regulatory catalyst in AI hardware. Position accordingly with short-dated puts or cash-secured short calls.