Why do this?
- Collect premium income upfront: The seller receives the option premium immediately (the bid price when selling). This is pure profit if the put expires worthless.
- Set a target acquisition price: The trader is saying, "I'm happy to buy 100 shares per contract at $350 if the stock is below that at expiration." The net cost basis becomes $350 minus the premium received (e.g., if premium is $12, effective cost ~$338/share).
- High-probability outcome preference: If AVGO stays above $350 through January 16, the put expires worthless → keep 100% of the premium, no stock acquired, and can repeat/sell another put.
- If assigned: They get the stock at the desired price (net of premium), achieving the accumulation goal.
Context-specific reasons (as of December 15, 2025)
AVGO is trading around $345 (down ~4% today and ~11% in recent sessions post Q4 fiscal 2025 earnings beat, amid margin concerns and AI sector rotation). The $350 put is slightly in-the-money (ITM) or near at-the-money given the drop.
Traders doing this now (or recently) likely view the post-earnings selloff as overdone—AVGO shows oversold signals (e.g., RSI ~22) and remains a strong long-term AI/semiconductor play. They are willing to own shares around $340–350 net, seeing it as a compelling value entry.
Recent commentary from traders (e.g., on X) mentions selling puts in recent weeks "in anticipation of taking assignment" near these levels, targeting ~$340 as ideal but starting positions around $350.
This is bullish overall: selling puts reflects confidence the stock won't stay much lower long-term, while generating yield (decent premiums likely elevated from post-earnings volatility).
Risks include further downside forcing assignment at $350 when market price is lower (though premium cushions it), or opportunity cost if the stock rebounds sharply without them owning shares yet.
It's a disciplined way for pros to build positions in quality stocks during volatility without chasing at higher prices.
