By Jud Pyle, CFA, chief investment strategist for the Options News Network

There was definitely an abundant supply of Cisco Systems ( CSCO) call options this morning for investors interested in buying the Jan 27.5 calls -- at least one call seller has been boosting volume today.

Looking at Jan 2010 27.5 call options, we see that more than 8,000 contracts have traded so far today. But the bulk of this volume crossed the tape during the first 15 minutes of trading, when more than 5,500 27.5 call-option contracts traded, according to's Sidewinder report. The call prices remained unchanged from yesterday while the stock climbed 62 cents, or 3.22%, to $19.87 in mid-morning trading.

The current open interest in these calls is 1,089. This is a clear call-seller because the options market-makers were able to buy on the bid from the customer. Normally, with the stock higher, the options price bid/ask would have climbed without a large seller like we saw this morning.

Cisco did not announce any notable news today, but the information technology company plans to release third-quarter earnings on May 6. Last quarter, Cisco reported $1.5 billion in profit, a 27% drop from the same period last year when it booked $2.1 billion in profit. Cisco earnings per share could drop 2 cents to 24 cents for the third quarter and will drop further to 22 cents next quarter, according to analyst estimates.

So what can we say about this call activity? These 27.5 CSCO calls are way out of the money as the stock continues to inch up from a 52-week low of $13.61. As a result, implied volatility has dropped slightly to 32.6 and vega (the change in an option's price resulting from a 1% change in volatility) currently stands at negative 0.04. Another interesting thing we saw from the Sidewinder report two days ago was significant buying activity for May 18 puts -- 9,900 contracts traded during the first 35 minutes of trading on Tuesday.

Such call-selling activity does not mean investors should run right out and sell their shares. But it demonstrates how some investors are selling call options to protect some of the gains they've collected in the last couple months. Cisco hasn't seen a 52-week low since March 9, but this longer-term call-selling could be a bet by a long stock holder that even though the stock has been trending higher, a big rally is unlikely for the rest of the year.

Jud Pyle is the chief investment strategist for Options News Network ( and the portfolio manager of Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."