Cisco Systems Inc (NASDAQ:CSCO) earnings are due after the market closes on May 15. The Dow stock's been relatively quiet on the charts in recent weeks, per its 60-day historical volatility of 16.3%, which ranks in the 11th annual percentile. However, the options market is anticipating a big move for Thursday's trading.
Most recently, Trade-Alert places the implied earnings deviation at 7.1% for CSCO stock -- much wider than the 4.4% next-day move the shares have averaged over the last two years. Five of these eight earnings reactions have been positive, including the past three in a row, but just one post-earnings move was large enough to match or exceed what the options market is pricing in this time around (a 7.2% plunge in May 2017).
Options traders appear to be positioning for an upside move from Cisco Systems. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 2.86 calls for each put over the past month.
This call-skewed trading is continuing today, with 12,500 calls on the tape so far -- 1.4 times what's typically seen at this point, and more than double the number of puts traded. The May 53 call is seeing notable attention, and it looks like new positions are being purchased here for a volume-weighted average price of $0.82. If this is the case, breakeven for the call buyers at the close this Friday, May 17, is $53.82 (strike plus premium paid).
Looking closer at the charts, CSCO shares haven't closed a week above this level since May 3. The stock has been trending lower since its April 16 18-year peak at $57.53, and is fresh off a third straight weekly loss. And while the equity closed below its 80-day moving average for the first time since late January during Monday's broad-market bloodbath, Cisco Systems is back above this trendline today -- up 1.9% to trade at $52.25.
