Options traders are increasingly favoring Cisco, a legacy networking company that has shifted focus towards software and cloud-based AI technologies, as it approaches its earnings report this Wednesday. The stock has risen 15% over the past month, and there has been a notable surge in options trading, with over 75,000 call options traded compared to just 16,000 put options by noon on Friday.
This indicates a strong bullish sentiment among traders, particularly as more than twice as many calls were traded at the ask price or above, suggesting that traders are seeking upside exposure. On Monday, Cisco's shares continued to rise despite a challenging market environment.
The trading activity has primarily involved at-the-money call contracts, with the 100-strike call expiring on May 15 being the most actively traded. Additionally, implied volatility for Cisco options has increased significantly, reaching 47, the highest level in over a year, which aligns with trends seen in the semiconductor sector known for its volatile stock movements.
The rising premiums for call options, alongside increasing stock prices, is characteristic of momentum stocks that attract retail investors willing to make aggressive bets on rapid price increases. A recent example of this trend is Intel, which has seen its stock price soar by 88% since bullish options activity was noted prior to its earnings announcement