Are Cisco System, Inc. (CSCO) Bears About to Get Burned?

Cisco Systems, Inc. (NASDAQ:CSCO) intends on buying OpenDNS, but puts are still popular

Jun 30, 2015 at 2:23 PM
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Despite news that the company intends to buy security firm OpenDNS, Cisco Systems, Inc. (NASDAQ:CSCO) is up just 0.2% today at $27.58. Meanwhile, it looks like traders are betting on downside in the short term, as puts are crossing at 1.5 times the typical afternoon pace. The July 26.50 strike appears to be seeing buy-to-open activity, as traders bet on the shares breaching $26.50 by the close on Friday, July 17, when front-month options expire.

This focus on puts is part of an ongoing trend in the stock's option pits. CSCO's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.45 ranks higher than 68% of all similar readings from the past year. In other words, put buying has been more popular than normal of late on the stock.

Even though the stock hasn't been particularly strong today, it remains a long-term outperformer, gaining 10% year-over-year. What's more, CSCO could see support from its rising 200-day moving average, a trendline that contained the shares losses earlier today. 

Another indicator to look at is Cisco Systems, Inc.'s (NASDAQ:CSCO) 14-day Relative Strength Index (RSI), which comes in at 30. This means the stock has reached oversold territory, and could be on the verge of a technical comeback. If this does happen, an unwinding of the pessimism surrounding CSCO could act as a tailwind. 
 

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