Cisco Systems, Inc.'s (NASDAQ:CSCO - 19.11) stagnant year-to-date price action caught the attention of a bold spread strategist on Thursday. Volume was lower than expected on both sides of the aisle, but this trader used both puts and calls to initiate a short straddle in the January 2013 series of options. Specifically, a block of 2,250 January 2013 19-strike puts changed hands around 11:45 a.m. ET on the NASDAQ PHLX (PHLX) at the bid price of $1.26, while a symmetrical block of 2,250 January 2013 19-strike calls simultaneously crossed at the bid price for $1.02. A net credit of $2.28 was established for the play. Open interest at both strikes rose overnight, confirming our suspicions that new positions were initiated.

The best-case scenario for this speculator is for CSCO to finish right at $19 by the time January expiration rolls around, allowing her to pocket the maximum reward on the play, or the initial premium collected. However, she still stands to profit as long as the equity churns between $16.72 (the strike minus the net credit) and $21.28 (the strike plus the net credit) over the next four months. This play is not for the faint of heart, however, as the risk is theoretically unlimited to upside, and substantial to the downside.

Widening the sentiment scope, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and PHLX have preferred bearish bets over bullish in recent months. In fact, the stock's 50-day put/call volume ratio of 0.45 ranks higher than 62% of other such annual readings taken over the past year, indicating puts have been bought to open over calls at a faster-than-usual pace.

What's more, CSCO's Schaeffer's put/call open interest ratio (SOIR) of 0.77 ranks in the 71st percentile of its annual range. In other words, short-term speculators have been more put-heavy only 29% of the time during the last 52 weeks.

As touched upon earlier, CSCO has tacked on a modest 5.7% in 2012. Additionally, any attempts to make a significant move higher over the past year have been stunted by the stock's 200-week moving average. CSCO has only seen three weekly closes north of this level during the last 12 months. To the delight of the aforementioned spread strategist, this trendline has recently set up camp in the $19-$20 neighborhood.

Should this Dow component continue to churn near the $19 mark over the next four months, the short straddler will find her risky prediction turn into a profitable reality.

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