Cisco Systems, Inc. (CSCO) Sees Long-Term Put Buying

Cisco Systems (CSCO) is in the midst of its annual financial analyst conference today, and company CEO John Chambers has stated that the company’s first quarter was phase one of recovery. He also believes the firm will hit the middle of its 12-17% growth projection. More words of guidance will be released throughout the remainder of today, as the conference is scheduled to run through 6:00 PM Eastern Time.

The options-trading community is being fairly passive in Cisco today, with the notable exception of the July 24 puts. More than 4,000 contracts have traded at this at-the-money put strike, which came into today’s session with open interest of 3,967.

A number of block trades, amounting to more than 3,600 worth of today’s volume, crossed the tape around 11:11 AM Eastern, trading at $2.29 per contract. This was close to the ask price at the time of the trade, suggesting these may have been bought to open.

Additionally, the put was recently trading 15 cents higher with the stock down just 22 cents. to $23.99 Given the option’s delta of 48%, it should have been trading down closer to 11 cents, but buying demand is driving its price skyward.

If investors have in fact bought these puts to open, they will be looking for CSCO to fall south of $21.71 (the strike minus the premium paid) in order to break even. That’s a pretty large drop in the shares in order to enter profitable territory.

Of course, volatility could move lower as well, affecting the price of these contracts. In the past week or so, the price of the December at-the-money straddle has dropped from $1.14 to $0.83 as time value decays and volatility comes in slightly.