Broadcom and Lululemon Hit by Big Pre-Earnings Option Bets. What's Next?
Earnings season is often when institutional positioning becomes most transparent, and ahead of the December 11 after-hours results, $Broadcom(AVGO)$
The two companies show completely different structural bets: Broadcom's option flow suggests institutions expect “limited upside and rising dispersion,” while Lululemon's deep in-the-money put selling looks more like “using short-term fear to accumulate shares at a discount.”
Broadcom: High expectations priced in, institutions betting the upside is capped
AVGO saw a classic time-diagonal bear call spread executed within a single second: selling the January 16, 2026 1200C and simultaneously buying the January 9, 2026 1340C, both with identical size and timestamp—a clear institutional multi-leg order with a premium outlay of roughly $4.18 million. This structure is not a bet on a collapse; rather, it is a wager that “the stock won't rally meaningfully after earnings.” By selling a richer, longer-dated call to lock in high implied volatility and buying a higher strike call to cap risk, institutions are effectively signaling that even a solid earnings print may not trigger a Nvidia-style breakout.
This aligns closely with prevailing expectations for Broadcom's results. The market holds high hopes for AI ASIC revenue and VMware integration synergies, but the stock has already rerated to record highs, narrowing the room for an upside surprise and making an “inline but not spectacular” result more likely. In such a setup, selling calls to harvest elevated volatility while limiting upside exposure becomes the more attractive institutional approach. The trade reflects not pessimism, but a view that near-term upside is constrained.
Lululemon: Institutions deploy tens of millions to accumulate shares at a discount
Lululemon's option activity tells a completely different story. In the days leading into earnings, institutions aggressively sold deep in-the-money 340P contracts, generating over $36 million in premium and effectively lowering their acquisition cost to roughly $181—almost equal to the current stock price. This type of structure appears only when institutions are willing to be assigned shares; it is a classic “discounted accumulation” strategy that exploits extremely elevated pre-earnings implied volatility. With IV well above triple-digit levels, selling deep ITM puts captures substantial time premium, making the true risk far lower than the nominal strike suggests.
Fundamentally, market sentiment toward LULU has become polarized: North American growth has weakened and men's apparel momentum has slowed, yet international growth remains strong, margins are improving, and brand equity remains intact. Institutions clearly do not fear a catastrophic post-earnings selloff; instead, they appear to be using high volatility to build long exposure and stand ready to take shares if needed. This is a valuation-driven bet—very different from Broadcom's volatility-driven approach.
Summary
Taken together, the options flows in Broadcom and Lululemon reflect the same institutional mindset: pre-earnings uncertainty is rising, but elevated volatility is not something to fear—it is something to use. Broadcom's call spread indicates expectations for limited upside, while LULU's put selling suggests long-term accumulation amid short-term pessimism.
For investors, these signals are worth watching closely. In the near term, AVGO's structure implies constrained post-earnings breakout potential, while LULU's structure indicates downside risk may be overstated. Over the mid-term, Broadcom continues to benefit from AI infrastructure demand, and Lululemon's brand and margin profile support a recovery trajectory. Institutions have already shown their hand through options: they are not betting on direction—they are betting on structure; not reacting to volatility, but using volatility to shape returns.
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