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Put Players Roll the Dice on Cisco Systems, Inc. (CSCO)

However, some of this CSCO put volume is of the sold-to-open variety

by 4/30/2013 2:06 PM
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Put activity is running hot on Cisco Systems, Inc. (NASDAQ:CSCO) today, as roughly 33,000 of these contracts have changed hands so far. This is a 57% mark-up over the equity's expected intraday put volume, and almost double the number of calls traded. However, unlike last Friday's speculators, a number of the current session's traders are using puts to place neutral-to-bullish bets on CSCO.

Leading the pack is the August 17 strike, where more than 9,700 puts have crossed the tape -- 95% of them at the bid price, suggesting they were sold. These out-of-the-money contracts were exchanged at a volume-weighted average price (VWAP) of $0.15. Since today's volume has exceeded current open interest levels -- and implied volatility has ticked slightly higher since the opening bell -- it's likely that new positions are being established here. In other words, traders are counting on CSCO to remain north of $17 through August expiration -- rendering the options worthless, and allowing speculators to pocket the initial premium received.

From a wider sentiment scope, however, CSCO calls have been preferred over puts lately. The equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio checks in at 2.21, conveying calls bought to open have more than doubled puts during the past two weeks. This heavy accumulation of bullish bets -- particularly at the May 22 and 23 strikes -- could end up translating into options-related resistance down the road.

Cisco Systems, Inc. has been rather sluggish on the charts lately, having touched a year-to-date low of $19.98 just over a week ago, and trailing the broader S&P 500 Index (SPX) on a relative-strength basis during the past three months. At last check, the stock was trading at $21.10 -- just below its 40-day moving average, which has served as a ceiling for the past couple of weeks.


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