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Option Brief: As usual, Cisco Systems, Inc. (NASDAQ:CSCO) calls outpaced puts in the options pits yesterday. However, the option that added the most contracts overnight was the weekly 2/28 22.50-strike put. Open interest spiked by 4,439 contracts -- indicating new positions were opened. Getting more specific, 81% of yesterday's volume at that put -- including a sweep of 5,005 contracts -- traded at the ask price, making it safe to assume a sizable portion of the contracts were bought.
By scooping up the puts, Wednesday's speculators expect CSCO will extend its march south of $22.50. Currently, the shares are off slightly at $22.25, with breakeven on those 22.50-strike puts not far below at $22.17 (strike price less the volume-weighted average price of $0.33). However, if the Dow component bounces back above the strike price by the closing bell next Friday, Feb. 28, the most the put buyers will lose is the initial cash outlay.
Technically speaking, Cisco Systems, Inc. (NASDAQ:CSCO) is a long-term laggard. The shares have tacked on less than 6% in the past year, while the S&P 500 Index (SPX) has advanced 21%. In fundamental news, the networking name was sued earlier this week by Crossroads Systems, Inc. (NASDAQ:CRDS) for patent infringement.