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.

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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
Puts
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