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Here's How to Max Out Broadcom (AVGO) Stock Options' Profit Potential
Posted On Jan 06, 2026 by Joshua Enomoto
Ranking among the world's top semiconductor and software giants, Broadcom (NASDAQ:AVGO) enjoyed another standout performance in 2025. In the past 52 weeks, AVGO stock gained 47%, far exceeding the Nasdaq Composite index's return of only 17% during the same period. However, even mighty Broadcom hasn't been immune to concerns impacting the underlying artificial-intelligence ecosystem.
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It's not that generative AI is about to take a backseat or that it will soon be relegated to other passing fads. By all indications, machine learning will reshape the paradigm of productivity over the next century and beyond. The problem is the extraordinary capital expenditures that have flowed into the space. With the low-hanging fruit being plucked, investors are largely operating in "show-me" mode.
Such concerns represent volatility risks — but they also offer upside opportunities.
Essentially, the stock market is a multiverse, with alternate versions of reality competing for dominance of the one true timeline. Such a framework becomes all the more obvious in the options market, where traders are quite literally speculating on or hedging against myriad manifestations of reality becoming exclusive.
With so many voices and trades whizzing around in the options ecosystem, it's inevitable that pricing inefficiencies will occur. Even better, retail traders enjoy certain structural advantages that they can potentially exploit — so long as they leverage risk topography.
What is Risk Topography in the Stock Market?
At the core, risk topography is a three-dimensional view of demand structure, encompassing expected (terminal) price, probability density and population frequency. In other words, risk topography offers a visual diagram to answer some of the biggest questions that traders have: how much, how likely and how frequently?
Imagine that you're the head coach of a professional football team. From the perspective of casual fans, they may only care about wins and losses. Ultimately, you care about those things too. However, you are also deeply vested in the process of winning — the preparation, the analytics, the in-game adjustments and so on.
Obviously, winning matchups involves scoring more points than the opposition. However, given the limited time that you have — along with limited resources (i.e., players can't go full speed all the time without risking exhaustion and/or injury) — your team must maximize opportunities when it has control of the ball.
Essentially, this dynamic means that when there are realistic opportunities, you should go for touchdowns rather than settling for field goals. A perfect example is the decision to go for it on fourth down. While a fourth-down conversion attempt has a lower probability than kicking a field goal (depending on distance), the former event has a higher expected value.
If you always settle for field goals when you really had a good chance of scoring touchdowns, you risk losing the game down the line — especially if your opponent gains momentum. Touchdowns stack up big points and help maximize your offense's full potential.
Of course, you don't just go for it willy-nilly, and that's where risk topography enters the frame. By understanding where stock activity traverses over a given time period, you can make an educated guess whether it's worthwhile to be aggressive or stick with the data.
Plotting a Trade for AVGO Stock
Looking at AVGO stock specifically, over any given 10-week period, Broadcom would be expected to land between $332 and $386 (assuming an anchor price of $347.62). However, the densest part of probability mass would concentrate between $355 and $370. Beyond $370, AVGO's risk geometry shows a severe acceleration in probability decay. Therefore, rational, data-driven traders will likely be targeting the strike prices of $360 and $370.
However, we're not particularly interested in trading the aggregate data of AVGO stock (which in this case extends back to January 2019). Instead, we want to isolate the statistical response to the current quantitative signal. In the past 10 weeks, AVGO stock printed only four up weeks, leading to an overall downward slope. Under this setup, the forward 10-week returns would be expected to range between $330 and $410.
Most importantly, probability density would be most elevated between $357 and $383. What's more, between $380 and $385, the penalty in probability density isn't that severe, landing at roughly 24%. Stated differently, the probability density of AVGO stock terminating at $350 over the next 10 weeks is about the same as the density of the stock terminating at $390.
Let's pause here for a second because this insight represents the structural advantage that retail traders enjoy.
Generally speaking, Wall Street's market makers price risk monotonically; that is, risk increases in proportion to distance away from spot. Under this parametric model (such as Black-Scholes), betting on the $390 strike should be considered riskier than betting on the $350 strike. However, under this quantitative, hierarchical framework, the probabilistic risk is about the same. Thus, you are incentivized to go for it on fourth down.
On another point, by looking at risk topography, we can see that there is heightened activity (population frequency) expected around the $380 level. Although most instances of the 4-6-D signal would see AVGO stock land between $357 and $383, the projected population data lends some credence that, under certain conditions, there's a chance that the stock will terminate at $390.
Putting It All Together
Given all the data that we have collected through a deep dive of risk topography, bullish speculators may be tempted by the 380/390 bull call spread expiring Feb. 20, 2026. This trade is aggressive, requiring AVGO stock to rise through the $390 strike at expiration to fully trigger profitability.
However, if the trigger does materialize, the maximum payout stands at almost 285%. For only putting $260 at risk (which is the most that can be lost), you're fighting for the chance to gain $740 as profit. What's more, the breakeven price lands at $382.60, which puts the threshold near the meat of peak probability density.
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