Billionaire investor Stanley Druckenmiller recently made a big investment in Broadcom (AVGO), increasing his stake to 239,980 shares. 

That stake, up 35% since September, is worth almost $56 million, one of the largest holdings in Druckenmiller’s private family fund. Now, Broadcom shares have surged almost 70% recently, so the stock is probably due for a breather.

But Druckenmiller’s big bet suggests there’s plenty of upside potential left.

I anticipate some consolidation into January and perhaps even February before the stock makes its next big move. That’s why the trade to make on Broadcom in the near term is a short iron condor.

Let me show you.

The short iron condor is a combination of a short call spread and a short put spread – a trade that sells premium on both the lower and upper bounds of price under the notion that prices remain rangebound in consolidation of strength.

As a result, the position loses the value we collected for selling it, and we are able to buy it back at a cheaper cost and keep the difference as profit for holding the spreads over time. 

Here’s the trade structure I’m looking at:

• Sell to open 1 AVGO 17 Jan 260 calls 
• Buy to open 1 AVGO 17 Jan 265 calls 
• Buy to open 1 AVGO 17 Jan 220 puts 
• Sell to open 1 AVGO 17 Jan 215 puts 

At this writing, the credit collected is $1.67 and this number represents the total profit for the position.  

The reason I chose these particular strikes is because of AVGO’s support and resistance levels. The relative resistance zone currently sits right around $250, and from here we should consolidate (move around within a range of price for a period of time). The relative support is near $225.

This strategy provides four outcomes to exit the trade: 

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