Broadcom Stock: Why This Long-Term Covered Call Might Deliver A 26% Return Or More

Ahead of Broadcom's June 5th earnings release, a bullish long-term options strategy, a leap covered call, is being suggested for AVGO. The strategy involves buying 100 shares of Broadcom and selling a June 18, 2026, 250-strike call, currently priced around $44.20, aiming to reduce the cost basis to $197.60 per share; the trade is suggested after the earnings release to minimize risk. The article identifies key support levels at 195 and 215, and a relative resistance zone around 255, noting Broadcom's strong Relative Strength Rating of 95.

Analysis

Broadcom (AVGO) is exhibiting strong bullish technical signals ahead of its anticipated June 5th earnings release, trading recently within 5% (less than 13 points) of its all-time high of 251.88. The article highlights a long-term options strategy, a leap covered call, involving the purchase of 100 shares and the sale of a June 18, 2026, 250-strike call option, which recently priced at $44.20. This strategy aims to reduce the effective cost basis of the stock to $197.60 per share, calculated from a recent share price implying a $24,180 outlay for 100 shares, less the $4,420 premium received. Key support levels are identified at 195 and, more immediately, at 215, with a relative resistance zone around 255. Broadcom's market strength is underscored by an excellent Relative Strength Rating of 95 and its designation as a leader in its group by IBD Stock Checkup. The proposed trade is advised for implementation post-earnings to mitigate potential downside from an adverse market reaction, though its long-term nature allows for entry at various times, risk permitting. If AVGO holds above $250 by expiration, the strategy could yield a 26% return.

Key Decisions for Investors

• Investors bullish on Broadcom (AVGO) could consider implementing the suggested leap covered call strategy after the June 5th earnings release to potentially acquire shares at a discounted cost basis and generate income, while being mindful of the $197.60 breakeven point.
• Monitor key technical levels for AVGO: near-term support at $215, further support at $195, and resistance around $255, as these levels may influence entry and exit decisions for the proposed options trade or stock positions.
• Acknowledge Broadcom's strong Relative Strength Rating of 95 and its leadership status within its sector as positive indicators, but remain cautious of earnings-related volatility around June 5th.