Bullish Betting Accelerates on Cisco Systems Stock

Cisco Systems' weekly call options are popular this afternoon

Jul 8, 2019 at 1:41 PM
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Cisco Systems, Inc. (NASDAQ:CSCO) entered 2019 bouncing sharply from its 320-day moving average, and has since gained 30%. More recently, the Dow stock's 80-day moving average has served as a springboard, and contained CSCO's pullback from its 18-year high of $58.15 from June 21. Today, broad-market headwinds have the tech stock down 0.6% at $56.24, but options traders are betting on a quick recovery.

Specifically, the weekly 7/12 and 7/26 57-strike calls are the two most active CSCO options so far, and data from Trade-Alert indicates new positions are being purchased here. If this is the case, speculators expect Cisco Systems stock to swing back above $57 over the next few weeks.

This bullish bias is hardly new in CSCO's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 2.93 ranks in the 80th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

Elsewhere on Wall Street, though, short interest on CSCO spiked 19.4% in the most recent reporting period to 52.2 million shares -- still a slim 1.2% of the equity's float. As such, it's possible some of the recent batch of call buying has been at the hands of shorts hedging against any additional upside.

Whatever the reason, short-term options premiums are relatively cheap at the moment. This is based on CSCO stock's Schaeffer's Volatility Index (SVI) of 16%, which ranks in the 5th percentile of its 12-month range, indicating low volatility expectations are being priced in.

csco stock daily price chart on july 8


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