Trade Update CSCO Beautiful Bounce Off Of Key Technical Support

AlittlemorethanaweekagoIinitiatedabullishcallcalendarinCSCOwiththeideathatthestockwouldconsolidatearoundthe$23levelforatadandIwouldlooktohelpfinancethepurchaseofcallsforthecompanysfiscalQ1resultsonNov13th?

Thestockhassoldoffabout2。

5%sinceputtingthetradeon,butthestructureisonlyworthafewlessthanwhatIpaid(below)。

TomanagethistradewithonedaytotheshortstrikesexpirationIamactuallynotgoingtodoanything,andletitrideforonemoreday,ifthestockisupandnear23tomorrowafternoonIwillthenmakethedecisiontocover。

ButIamgoingtoaddtothispositionasIfeelthestockhassoldoffinsympathywithcompetitorspoorresultslikeJNPR,andsomesuppliers/customersandthestockcouldbediscountingthepotentialfortheirownpoorresultsand/oroutlookwhentheyreportNov13th?

EitherwayIlikethetechnicalsetupasthestockthismorningnearlybouncedoffofmassivesupportnear$22,andthinkthereisadistinctpossibilitythestockcouldrunintotheirresultswhichcouldgivemetheopportunitytospreadtheNovcallsthatIamlongortakesomeoffofthetable?

UnlessweseeabroadmarketdeclineIwouldexpectCSCOtohold$22prettyfirmlyuntilearnings,andwithimpliedvolbidforearningsthesecallsshouldcarryprettywell。

CSCO1yrchartfromBloomberg

ACTION:CSCO($22。

38)BoughtNov23Callsfor。

45

MypreviouspositionfromOct16th:

TRADE:BoughttheCSCO($22。

98)Oct25th/Novreg23callcalendarfor。

50

Sold1Oct25th23callat。

25

Bought1Nov23callfor。

75

OntomorrowsexpirationIwilljustbelongtheCSCONov23calls,foranavgof。

475astheOct25th23callswilllikelyexpireworthless。



TradeRationale:ThebeautyofthepriortradestructureisthattheNov23callsarenow。

30lowerthanwheretheywereonOct16thwhenIinitiatedthecalendar,soby?

sellingtheOct25th23call,Ireducedmypurchaseprice,Inowthinkthestockbouncesbackto23priortoearningsandthenIwillhaveabitofoptionalitysotospeak!

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OriginalPostOct16th,2013?

NewTradeCSCO?

ChambersPot

Lastweek(below)IlookedatCSCOschartasaninterestingtechnicalset-upandmentionedthatcalendarsmaysetupwellinthenameintoearnings。

Withthestockbackatits200daymovingaverageanddownonthedaydespitethemarketbeinghigherwethoughtwedtakeashotonacalendar。

ThistradeisplayingofftheassumptionthatCSCOdoesntbreakdownherebutalsodoesntbouncemuchinthenextweekorso。

TRADE:BoughttheCSCO($22。

98)Oct25th/Novreg23callcalendarfor。

50

Sold1Oct25th23callat。

25

Bought1Nov23callfor。

75

Break-EvenonOct25thExpiration?

-Profitsaremaximizedat$23。

Slightmovesaboveandbelowthatstrikearealsoprofitablewithbigmoveshigherorlowerputtingthestructureatriskoflossesonexpiration。

-Maximumriskis。

50

TradeRationale:AssumingCSCOstaysrangebound,thisprotectsagainstdecayforanearningsplaybysellingtheweeklies。

IfCSCOstaysnear23inthenextweekwemaylooktorolltotheNov8thweeklies。

EarningsarejustafewdaybeforeNovexpirationsothosecallsshouldcontinuetostaybidformaimpliedvolperspective。

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SincereportingalacklusterQ4andissuingdisappointingQ1guidanceinmidAugust,CSCOshareshavebeendownabout13%aftermakingmulti-yearhighs?

Theoneyearchartbelowshowsthismorningsbreachofthestocks200daymovingaverage(yellow),atrendindicatorthatithasnotclosedbelowsinceNov2012。

CSCO1yrchartfromBloomberg

Thestockheldtoday,butifCEOJohnChamberscommentsfromacoupleweeksbackonCNBC(here)aboutthehealthoftheglobalrecoveryarealsoaboutthehealthofthecompanysearningsvisibility,thenthestockcouldbeataprettyprecariousspot。

Thebreakoutabove$22andaboveamulti-monthconsolidationinMayonmassivevolumeshouldserveasaverystaunchsupportlevelforthenearterm,butthatlevelisapproachingquickly,withincreasingvolumeondowndays。

Withthestockpausingatthemomentatits200daymovingaverageofabout$23andtheallimportant$22support/resistanceleveljustahairbelowcurrentlevels,IwouldbemoreinclinedtoenterasalongthanpresstheshortinfrontoftheirfiscalQ1earningsdueNov13th?

Wearekeepingacloseeyeonthequicklyshiftingsentimentinthename。

Thechartbelowofatthemoney30dayimpliedvol(blueline)vstherealizedvol(white)showsIVquicklyrisingwhilerealizedhasbarelypickedup,thishasalottodowithIVinthemarketpickingupdespiteCSCOsharesjustgrindinglower?

Thissetcouldmakecalendarslookattractive,staytuned。