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Cisco Systems, Inc. (NASDAQ:CSCO) call volume is running at faster than four times the usual intraday pace this morning. By the numbers, roughly 31,000 calls are on the tape, versus approximately 7,000 puts. Against this backdrop, the networking firm's 30-day at-the-money implied volatility has spiked 5.5% to 14.8%, as traders swarm the company's short-term options.
The bulk of this morning's activity has transpired at the out-of-the-money September 27 call, where more than 25,000 contracts have been exchanged. Since almost all of the calls traded at the ask price, and volume outstrips open interest, it's safe to assume the contracts are being bought to open.
Long story short, the buyers anticipate CSCO will muscle higher over the next few months, and finish atop $27.18 (strike plus the volume-weighted average price of $0.18) at September options expiration. Historically, the shares haven't traded north of $27 since May 2010.
Regardless, if the stock is trading north of breakeven at expiration, the speculators will profit. However, if Cisco Systems, Inc. (NASDAQ:CSCO) -- currently trading at $24.76 -- is perched at or below the strike at options expiration, the call buyers will risk losing the initial premium paid.