By Jud Pyle, CFA, chief investment strategist for the Options News NetworkCisco Systems ( CSCO) is due to report its fiscal third-quarter earnings results after the market close on May 6. Today, right after the market opened, we saw some option activity that is likely the work of traders getting ready for this report. Looking at the May 18 puts in CSCO, we see that more than 9,900 contracts traded during the first 35 minutes of trading, according to the Sidewinder report at www.onn.tv. The options traded for a volume-weighted average price of roughly 61 cents per contract over those 35 minutes. These options closed at 56 cents last night. Given that the stock was roughly unchanged at the time these puts were changing hands, it is likely that this was a buyer of the puts because the puts were higher despite the stock being unchanged to slightly higher on the day.
Shares of CSCO are trading more than 38% higher from their closing low of $13.62 back on March 9, and they are at their highest levels since October, trading even higher than at the time of the pre-election rally. This recent run-up could be the reason that investors are purchasing some puts for downside protection in case the stock gives back some of its gains from the last six weeks of positive momentum. Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.