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What Options Traders Expect When Cisco Reports

NEW YORK (TheStreet) -- Internet routing hardware maker Cisco Systems  (CSCO - Get Report) is expected to report earnings after the market closes on May 14. Investors aren't expecting an improvement in earnings. The average estimate is currently 48 cents a share, falling 3 cents (5.9%) from 51 cents during the matching period last year.

CSCO Chart

Analysts are estimating as low as 47 cents per share, up to the most optimistic estimate of 49 cents per share. I believe Cisco will top the consensus and earns at least 49 cents.

During the last 52 weeks, the stock traded in a range of $20.22 to $26.49, and we are more or less right in the middle, albeit just above the 200-day moving average.

If we take a look at the options market, clues will emerge to what other investors are anticipating and thinking. Currently, based on call and put option trading, the market is expecting about a 6% or less price move. Options are pricing in a range of $21.57 to the downside and $24.31 at the upper end.

In order to profit from buying puts or calls, Cisco will have to move beyond those levels or you'll risk being right and still losing. The flip-side is if you think the shares will stay within that range, you can sell option premium in the earnings front contract and profit if you're correct.

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