CSCO Analysis

Cisco Systems Inc. (CSCO)

Update 5/22/2017: CSCO gapped sharply to the downside after earnings were published, and then traded sideways for three days. I exited for a loss as the options approached expiration.

Shares declined by 7.0% over five days, or a -555% annual rate. Tue options position produced a 49.4% loss on debit for a -3,603% annual rate.

CSCO publishes earnings on Wednesday after the closing bell.

I shall use the series of monthly options that trade for the last time nine days hence, on May 26.

Implied volatility stands at 22%, which is 1.6 times the VIX, a measure of the volatility of the S&P 500 index.

CSCO’s IV stands in the 66th percentile of its annual range and the 94th percentile of its most recent broad movement.

The price used for analysis was $33.97.

Premium: $1.17 Expire OTM  
CSCO-iron fly Strike Odds Delta
Long 36.50 94.0% 7
Break-even 35.17
Short 34.00 51.4% 51
Short 34.00 48.2% 49
Break-even 32.67
Long 31.50 90.7% 9

The premium is 47% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

Decision for My Account

I have entered a position on CSCO as described above. The stock at the time of entry was priced at $34.00

By Tim Bovee, Portland, Oregon, May 17, 2017

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