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Cisco Systems, Inc.'s (NASDAQ:CSCO) options pits are running at a slower-than-usual pace, with 27,000 contracts crossing the tape, compared to a typical intraday volume of 44,000. Nevertheless, one strike is attracting considerable attention -- namely, the October 22.50 put, where north of 9,900 contracts have changed hands. All of the trades have transpired at the ask price, and open interest at the strike consists of fewer than 600 contracts, so it's likely the contracts were purchased to open -- a theory confirmed by data from the International Securities Exchange (ISE). What's more, according to Trade-Alert, nearly half of the front-month put's volume traded in a sweep of 4,900 contracts.
The volume-weighted average price (VWAP) for the contracts is $0.05. Therefore, in order for the put buyers to profit, they need CSCO shares -- which currently sit at $23.25 -- to sink below $22.45 (strike price less VWAP) by options expiration this Friday. Additional gains will pile up south of that point. If the stock remains above the strike through the end of the week, however, the most today's traders stand to lose is the initial premium paid. That sum appears to be increasing, though, as the stock's 30-day, at-the-money implied volatility has jumped 4.6 percentage points, or 21.8%, during the course of the current session.
From a technical perspective, Cisco is up a solid 26.5% on a year-over-year basis -- though it has struggled recently. Specifically, relative to the broader S&P 500 Index (SPX), the shares have underperformed by over 10 percentage points during the past 60 sessions. Still, given the equity's longer-term strength, it's still possible that some of today's put buyers may be seeking short-term options-related protection against a further slide.
Elsewhere, Cisco Systems, Inc. (NASDAQ:CSCO) is scheduled to make its quarterly appearance in the earnings confessional after the close on Nov. 11. Historically, the stock has topped its last eight per-share profit estimates. For the fiscal first quarter, Wall Street is expecting earnings of 51 cents per share for CSCO -- or three cents higher than its year-ago result.
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