Stocks quoted in this article:
Puts were the options of choice on Cisco Systems, Inc. (NASDAQ:CSCO) Wednesday, outpacing calls by a roughly 2-to-1 margin. Put players placed a target on the stock's July 18 strike, where nearly all of the 17,152 contracts that traded did so at the ask price. Implied volatility rose 1.9 percentage points, and almost all of the day's volume translated into open interest overnight, pointing to buy-to-open activity. In other words, this group of put buyers is expecting CSCO to sink below $18 -- an area not seen by the stock since November 2012 -- by the close on Friday, July 18.
Given CSCO's lackluster performance on the charts -- the stock is down 2.7% year-to-date to linger near $21.83 -- yesterday's preference for puts only extends a recent trend of accelerated demand for bearish bets. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.86 ranks in the 89th percentile of its annual range. In other words, puts have been bought to open over calls with more rapidity just 11% of the time within the past year.
In the near term, this put-skewed bias could come back to haunt option bears. Specifically, in the front-month series, peak put open interest can be found at the underfoot March 21 strike. From a contrarian perspective, this area could serve as options-related support for Cisco Systems, Inc. (NASDAQ:CSCO) over the next two-plus weeks, as the hedges related to the more than 87,650 contracts that currently reside here are unwound ahead of expiration.