Stocks quoted in this article:
Cisco Systems, Inc. (NASDAQ:CSCO) followed the broader market's path lower on Friday, shedding nearly 2% by the time the closing bell rang. Nevertheless, bullish bettors were out in full force during the course of the session, as roughly 93,000 calls changed hands -- almost triple the norm. By comparison, around 57,000 puts crossed the tape. Taking a closer look at the data, it appears that one group of speculators is counting on CSCO to trek higher over the next few months -- a time period that encompasses the company's next quarterly earnings report.
To be more specific, north of 10,000 contracts were exchanged at the December 20 call for a volume-weighted average price (VWAP) of $3.35. All of these in-the-money calls traded at the ask price, and open interest at this strike surged by 9,892 contracts over the weekend, confirming the initiation of fresh bullish bets.
In order for speculators to profit from their bought-to-open calls, CSCO must ascend past breakeven at $23.35 (strike price plus the VWAP) by December expiration. This mark is just a stone's throw away from the stock's current perch at $23.33. Still, should the tech concern fail to rise high enough to reward Friday's bulls, the most the traders stand to lose is the initial premium paid for their long calls. Also of note, the equity's Schaeffer's Volatility Index (SVI) of 20% ranks lower than 91% of similar readings taken during the past year, suggesting CSCO's near-term options are relatively cheap right now.
Technically speaking, Cisco Systems, Inc. (NASDAQ:CSCO) has advanced nearly 19% year-to-date, but has trailed the broader S&P 500 Index (SPX) by 10 percentage points during the past two months. What's more, the stock has yet to recover from a bearish gap on Aug. 15, when the firm announced plans to cut 5% of its workforce.
As alluded to earlier, the company is on tap to report quarterly earnings after the close on Nov. 13, and has bested the consensus view in each of the past eight quarters. However, the stock has an erratic history following its previous earnings reports, gaining as much as 12.6% and losing up to 10.5% the day after posting results. For the fiscal first quarter, analysts are expecting a profit of 51 cents per share.
Option Briefs offer a concise look at recent notable trading activity. For more in-depth coverage of securities from an Expectational Analysis®
perspective, please visit our Trading Floor Blog section.