Revolutionizing Options Trading
Following the 10-for-1 split in Broadcom Inc (AVGO) stock, the dynamic of shorting puts and calls has undergone a transformative shift, ushering in a new era of efficiency and accessibility. With the AVGO stock price now at one-tenth of its previous value, the landscape for executing out-of-the-money (OTM) options strategies has significantly evolved.
Facilitating Shorting Puts and Calls
Previously, executing these strategies required substantial cash outlays. For instance, shorting the July 19 expiration put option with a $1,670.00 strike price demanded $167,000 in cash. Today, amidst the revamped scenario, shorting the $167.00 strike price put option entails a significantly reduced cash requirement of just $16,700, offering a more accessible pathway for investors to generate income.
A similar narrative unfolds in the realm of shorting covered calls. Previously a capital-intensive endeavor, the process now allows investors to engage in covered call trading after purchasing 100 shares for a fraction of the previous cost, signaling a more cost-effective approach post-split.
Assessment of AVGO Stock
An evaluation of the broader market sentiment towards AVGO stock reveals a consensus on its undervaluation. Projections based on robust free cash flow (FCF) and corresponding margins forecast a potential upside, painting a bullish outlook for the stock post-split.
Moreover, analysts collectively echo optimism with the average price target projecting a notable increase from the current trading price, reaffirming the notion that AVGO stock remains an attractive investment opportunity.
Embracing a recalibrated approach post-split, potential investors can leverage these revised dynamics to navigate the options market with enhanced feasibility.
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