Cisco Systems, Inc. (CSCO) Options Bulls Eye a Post-Earnings Breakout

Cisco Systems, Inc. (NASDAQ:CSCO) will report earnings after tomorrow's close

Aug 16, 2016 at 3:31 PM
facebook X logo linkedin

Tech firm Cisco Systems, Inc. (NASDAQ:CSCO) will take its turn in the earnings confessional after tomorrow's close. Ahead of the event, the Dow stock is down 0.2% at $31.14, but options traders appear to be betting on a post-earnings breakout to levels not seen in more than eight years.

By the numbers, around 54,000 call options have changed hands so far, compared to 28,000 put options. CSCO's September and October 32 calls have received notable attention, and it looks like some of the activity could be of the buy-to-open kind. In other words, traders expect CSCO to rally north of $32 by the time the options expire.

More broadly speaking, today's call-skewed session is just more of the same in CSCO's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 1.87 calls for every put over the past 10 sessions. Plus CSCO's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.32 suggests near-the-money calls more than triple puts among options expiring in three months or less.

Drilling down, CSCO's August 32 call has seen the biggest rise in open interest over the last two weeks, with 14,608 positions added. According to the major options exchanges, the vast majority of these calls were bought to open. In other words, these traders need CSCO to move north of the strike by front-month options expiration at this Friday's close. As a point of reference, the stock has not explored the north side of $32 since November 2007.

However, the shares have been tearing up the charts since bottoming at an annual low of $22.46 in mid-February, up 39%. Plus, CSCO hit an eight-year high of $31.25 one week ago today. If any one of the 32-strike calls expires out of the money, though, the most the options buyers stand to lose is the initial premium paid.

Meanwhile, the stock could see some volatility in the wake of its quarterly earnings report. Looking back over the past eight quarters, CSCO has averaged a single-session post-earnings swing of 4.6%. This time around, the options market is pricing in a slightly bigger 6.4% move for the shares of Cisco Systems, Inc. (NASDAQ:CSCO).

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI