Cisco Systems, Inc. (CSCO) (+6.95%) reported earnings that crushed expectations.
The company reported 61 cents per share (adjusted), surpassing the flat earnings reported a year earlier. While only a penny higher than analysts’ expectations, the stock is trading near the 26.55 level (+6.95%) in the pre-market session.
- Institutions own 78% of shares outstanding
- Applications (acquired AppDynamics) up 6% to $1.203 billion.
- Security products were up 8% to $585 million.
- Services were up 1% to $3.082 billion.
We are considering an income trade on Cisco Systems, with CSCO IV Rank at 98%. We want to capture this elevated premium.
Technically, the stock doesn’t move dramatically. Volume spiked into earnings last night and RSI is above 50. The latter will head higher this morning. Stochastic has already turned higher, with ATR beginning to increase.
Support is near the lip of the current cup pattern. The trading that occured between the 33.76 pivot high in early May, and the recent handle at the same level built a large VBP (Volume by Price).
Cisco Trade Considerations
All things considered we have a few scenarios.
Stock remains at 36.50: The stock could hold the pre-market levels. In this case we would most likely buy more shares, adding to the current position from the 34.00 entry a week earlier. We had OTM puts for protection.
We are looking buy write the 36.00 or 36.50 call that expire tomorrow or next Friday depending on the premium. We will buy more shares and sell covered calls in this scenario. If ImpVol stays elevated we should be able to capture 0.75 ~ 1.00.
Stock trends higher: If the stock begins to trend higher, we could create a Bull Put spread with our “protective puts”, by selling the 34 or 35.00 put. We already have the 32.00 puts. In this scenario, the trader is looking for a bullish outcome, by selling the put premium for income.
Stocks begins to fade: If the stock begins to fade, we could also take profits and open a Bear Call Spread, selling a close to the money call and buying an OTM call for protection should the stock begin to reverse after the Opening Range and begin trending higher. In this scenario, the trader is looking for a bearish outcome, by selling the call premium for income.
Either way, with IV Rank at 98%, we have an opportunity to sell premium.
Pre-market: Many of our positions are green. YY (+2.45) WMT (+4.00) VEEV (+1.71) SQ (+0.64) ROKU (+2.17) MU (+0.34) JD (+0.45) FB (+1.15) BABA (+1.77) AAPL (+1.42)
See you then,
Vinny