Cisco Systems Options Hot During Post-Earnings Drop

CSCO options are crossing at 10 times the expected intraday pace

by Patrick Martin

Published on Aug 15, 2019 at 10:18 AM

While the broader stock market is higher in early trading, blue chip Cisco Systems, Inc. (NASDAQ:CSCO) is sharply lower after earnings. While earnings and revenue came in above estimates in its fiscal fourth quarter, Cisco's current-quarter and full-year guidance fell short of expectations. The tech titan cited the impending U.S. tariffs and plummeting sales in China as reasons for the cautious outlook. 

A host of analysts have come forward to adjust their ratings. No fewer than seven brokerages have issued price-target cuts, the lowest coming from Instinet to $47 from $53. Credit Suisse said the results weren't surprising, and lowered its CSCO target price to $50. Raymond James bucked the trend, and upped its target to $59 from $58.

Against this backdrop, Cisco Systems stock is down 6.5% to trade at $47.33. CSCO nabbed an 18-year high of $58.26 on July 16, but has now shed 19% since that peak. And yesterday, the shares breached their 200-day moving average for the first time on a closing basis since late January. Year-to-date, the equity is still up 10%. 

Today's big price move has sparked heavy trading in CSCO's options pits, with roughly 79,000 calls and 44,000 puts on the tape already -- 10 times what's typically seen at this point, and volume pacing in the 100th annual percentile. The September 55 call is most active, and data from the International Securities Exchange (ISE) confirms some buy-to-open activity here. By doing so, call buyers expect Cisco Systems stock to break out above $55 by September options expiration.

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