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Most Active Options Update: Cisco Systems, Inc. (CSCO)

Calls continue to be popular in Cisco Systems, Inc.'s options pits

by 7/16/2014 2:51 PM
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The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is Cisco Systems, Inc. (NASDAQ:CSCO).


Cisco Systems, Inc. is benefiting from today's technology-related rally, with the shares 1.3% higher to trade at $25.99. In the stock's options pits, call volume is once again seeing accelerated activity, with the contracts trading at more than two times the average intraday pace. The most active CSCO strike today is the September 26 call, where 15,203 contracts have changed hands. The majority of this activity occurred when a multi-exchange sweep of 10,000 contracts was bought right at the open at the ask price of $0.80. Plus, implied volatility edged higher at the transaction, suggesting the positions were newly initiated.

In order for the call buyer to profit from her play, CSCO needs to be trading north of $26.80 (strike plus premium paid) when the contracts expire at the close on Friday, Sept. 19. Gains will accrue with each additional step north of here, while the trader's risk is capped at the initial cash outlay, or $800,000 (number of contracts * premium paid * 100 shares per contract), should CSCO close south of the strike at expiration.

While the stock edged slightly above $26 to tag an intraday peak of $26.05 earlier, this area could serve as a ceiling in the near term. A heavy accumulation of call open interest is currently located at the July 26 strike, which could translate into a layer of options-related resistance, as the hedges related to these bets are unwound ahead of Friday's close.

Looking ahead, though, Cisco Systems, Inc. (NASDAQ:CSCO) is slated to report quarterly earnings after the close on Wednesday, Aug. 13. On average, the stock has tacked on a single-session post-earnings gain of 1.5% over the past eight quarters. For CSCO's fiscal fourth quarter, analysts are calling for a per-share profit of 53 cents -- a penny more than what the blue chip earned one year ago.


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