Cisco Systems, Inc. (CSCO) –
Shares in the world's largest maker of networking equipment increased
as much as 2.5% during the session to secure an intraday high of $17.42
after the company announced it will pay its first ever cash dividend on
April 20, to shareholders of record on March 31, 2011. Cash-rich Cisco
Systems said the dividend will amount to $0.06 a share. Shares in the
San Jose, CA-based manufacturer of switches and routers are still
hovering around their lowest level since April 2009, and fell to a new
52-week low of $16.97 earlier this week. But, it looks like one big
option strategist is looking for the price of the underlying to rebound
ahead of January 2012 expiration. The investor initiated a three-legged
bullish play, selling puts to partially finance the purchase of a call
spread, in order to position for brighter days in CSCO's future. The
trader sold 40,000 puts at the January 2012 $15 strike at a premium of
$0.95 each, purchased the same number of calls up at the January 2012
$17.5 strike for a premium of $1.72 per contract, and sold 40,000 calls
at the higher January 2012 $22.5 strike at a premium of $0.42 apiece.
Net premium paid to initiate the spread amounts to $0.35 per contract,
thus positioning the investor to make money in the event that Cisco's
shares rally another 2.5% over today's high of $17.42 to surpass the
effective breakeven price of $17.85 by expiration. Maximum potential
profits of $4.65 per contract are available to the trader should shares
in CSCO jump 29.2% to exceed $22.50 ahead of expiration day next
January. Shares in the name last traded above $22.50 back in November
2010.
Career Education Corp. (CECO) –
Put options on the for-profit provider of education services are active
this morning with shares in Career Education Corp. slipping from an
intra-session high of $21.02 at the start of the session to a low of
$20.50. The stock currently stands 0.75% lower on the day at $20.53
just before 12:40pm in New York. More than 3,280 puts changed hands at
the April $20 strike against previously existing open interest of just
743 contracts. It looks like most of these put options were purchased
for an average premium of $0.85 each by investors positioning for
CECO's shares to pull back further ahead of April expiration.