CSCO – Cisco Systems, Inc. – The implementation of a plain vanilla debit put spread on the maker of switches and routers today suggests one options strategist is bracing for continued erosion in the price of the underlying stock through July expiration. Cisco’s shares dipped 1.90% to $23.22 just ahead of 12:00 pm (ET). The pessimistic player appears to have purchased 11,000 puts at the July $23 strike for a premium of $0.88 apiece, and sold the same number of puts at the lower July $20 strike for a premium of $0.25 each. Net premium paid for the transaction amounts to $0.63 per contract. The bearish investor makes money if Cisco’s shares decline another 3.66% to breach the effective breakeven point on the spread at $22.37 by expiration. Maximum potential profits of $2.37 per contract are available to the trader should shares fall 13.9% from the current price of $23.22 to break through the lower strike price of $20.00 by expiration day in July.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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