Pre-Earnings Call Options Hot On Cisco Systems, Inc. (CSCO)

Cisco Systems, Inc. (NASDAQ:CSCO) will take its turn in the earnings confessional after tonight's close

May 18, 2016 at 11:35 AM
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Although earnings season is all but over, there are still a handful of notable names gearing up to report. Tech firm Cisco Systems, Inc. (NASDAQ:CSCO), for instance, is scheduled to report fiscal third-quarter earnings after tonight's close. Ahead of the event, the Dow stock is up 0.1% at $26.68. The options market, meanwhile, is expecting a big post-earnings move for CSCO stock -- pricing in a 7.6% swing for tomorrow's trading. By the looks of it, options traders are anticipating CSCO's post-earnings action will resolve to the upside.

Over the course of the past 10 trading sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 34,082 call options, compared to 15,498 put options. Echoing this is CSCO's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.79, meaning near-the-money calls outweigh puts among options expiring in three months or less.

Looking back over the past two weeks, CSCO's June 28 call has seen the biggest rise in open interest, with 18,329 contracts added. According to the major options exchanges, a significant amount of this activity has been of the buy-to-open kind, meaning traders are betting on CSCO to rally north of $28 by the close on Friday, June 17 -- when the back-month options expire.

Today, CSCO call options are crossing at two times what's typically seen at this point in the day -- and are outpacing puts by a more than 2-to-1 margin. Most active is the stock's in-the-money July 25 call, where it looks like traders might be selling to close their positions.

On the charts, Cisco Systems, Inc. (NASDAQ:CSCO) hasn't traded south of $25 since mid-February. In fact, since hitting an annual low of $22.46 on Feb. 10, CSCO stock has jumped nearly 19%. Regardless, the most any CSCO call buyer stands to lose if their options expire out of the money is the initial premium paid.

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