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Cisco Systems, Inc. (CSCO) Call Volume Spikes Ahead of Earnings

However, Cisco Systems, Inc.'s past post-earnings losses do not bode well for bulls

by 12/30/2013 9:30 AM
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Option Brief: Cisco Systems, Inc. (NASDAQ:CSCO) captured the attention of call players on Friday, as roughly 104,000 contracts switched hands during the course of the session. This was almost double the equity's average daily call volume, and nearly five times the number of puts traded. A closer look at the data shows that some of these call players may be counting on a post-earnings gain for the tech concern.

More specifically, close to 11,400 calls crossed the tape at the February 2014 23 strike -- the majority of them at the ask price, signaling buyer-driven activity. Meanwhile, open interest surged by 4,762 contracts over the weekend, confirming the initiation of new bullish positions. By purchasing the calls to open, the traders are expecting CSCO -- currently docked at $22.02 -- to rise north of $23 by the close on Feb. 21.

Unfortunately for the call buyers, the security hasn't surmounted the $23 mark since mid-November, just before CSCO plummeted due to a lackluster revenue outlook. However, should the shares remain south of the strike price over the next two-plus months, the most Friday's traders stand to lose is the initial premium paid.

As alluded to earlier, Cisco Systems, Inc. (NASDAQ:CSCO) is slated to reveal fiscal second-quarter earnings after the market closes on Wednesday, Feb. 12. Although the company has bested consensus bottom-line estimates in each of the past eight quarters, the stock suffered notable setbacks following the last two earnings reports. In fact, after the firm's most recent turn in the earnings confessional, CSCO was still off 11.5% a week later.


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