Cisco Systems, Inc. (CSCO) Sees a Surge in Pre-Earnings Call Volume

Cisco Systems, Inc. (NASDAQ:CSCO) will report earnings after tonight's close, and call players are making a rare appearance

Nov 16, 2016 at 11:11 AM
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Put players have been busy in Cisco Systems, Inc.'s (NASDAQ:CSCO) options pits, as the tech firm gets set to report fiscal first-quarter earnings after tonight's close. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the Dow stock's 10-day put/call volume ratio of 1.18 ranks in the 86th annual percentile. In other words, CSCO puts have been bought to open over calls at a faster-than-usual clip in recent weeks.

Echoing this put-heavy bias is CSCO's top-heavy Schaeffer's put/call open interest ratio (SOIR) of 1.23. Not only does this show that puts outweigh calls among options set to expire in three months or less, but it ranks just 1 percentage point from a 52-week peak. Simply stated, short-term speculators have rarely been as put-skewed toward the tech stock as they are now. In fact, total put open interest on CSCO of 681,535 contracts arrives in the 95th percentile of its annual range (compared to call open interest of 647,329 contracts, in the middling 49th annual percentile).

Today, however, call players are coming out in droves, with around 20,000 calls traded so far -- two times the expected intraday amount -- compared to just 15,000 puts. A healthy part of the action appears to be due to a bullish roll, with one speculator seemingly selling to close her November 30.50 calls, while simultaneously buying to open the weekly 11/25 31.50-strike calls.

On the charts, CSCO has turned in an impressive performance since bouncing near $22.50 in the first quarter, up almost 41% at $31.67. However, this rally has been contained in the $31.90-$31.95 region, with the upper end of this range home to CSCO stock's Sept. 2 eight-year high.

Historically speaking, shares of CSCO have notched positive post-earnings reactions in five of the past eight quarters. On average, though, the stock has swung 4.4% in the session subsequent to reporting in the last two years -- regardless of direction. This time around, the options market is pricing in a slightly bigger single-session post-earnings move of 6% for Cisco Systems, Inc. (NASDAQ:CSCO).

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