$CSCO Options Intelligence

🎯 SELL CSCO NOV 14 74/76 CALL SPREAD

I recommend this credit spread because the term structure reveals a critical pricing inefficiency: the 2-day expiration (Nov 14) is trading at 85% IV—massively inflated from the 29.2% clean IV after stripping out earnings event premium. This is a classic post-earnings volatility crush setup. Cisco reports earnings TODAY after market close, and the options market has priced in a ±6.12% move ($4.40 on a $72.23 stock). Once earnings uncertainty resolves, IV will collapse from 85% to baseline levels, creating immediate profit on the short premium.[1][5]

Sell CSCO Nov 14 74/76 Call Spread
Stock Price: $72.23 | Entry: $0.35 credit

📊 Trade Metrics

• Risk: $165 (width of spread minus credit received)
• Reward: $35 (credit collected)
• Breakeven: $76.35
• Max Loss: $165 if CSCO > $76 at expiry
• Max Profit: $35 if CSCO < $74 at expiry
• Win Rate: 68% (based on delta and current price)
• Days to Expiration: 2

📈 Term Structure & Volatility Analysis

• Baseline 90-day Vol: 20.2%
• 2-day Market IV: 85.0% (MASSIVELY overpriced)
• 2-day Clean IV: 29.2% (after earnings adjustment)
• Event Premium: 55.8% (earnings volatility multiplier 3.75x)
• Calendar Opportunity: EXTREME - 7-day IV at 49% vs 2-day at 85% = 36% differential
• PRIMARY SIGNAL: SELL premium immediately post-earnings

📈 Greeks & Volatility

• Net Delta: -0.37 (short call bias)
• Theta: +$0.396/day (aggressive time decay)
• Vega: -$12 (massive benefit from IV crush)
• Current IV: 85% (peak earnings volatility)
• IV Rank: 100% (maximum - SELL signal confirmed)
• Put/Call Ratio: 0.02 (extremely bullish, calls overpriced)

🎯 Why This Trade

The earnings event creates a unique volatility arbitrage. Today's market intelligence confirms "Cisco reports Q1 FY2026 earnings after market close on November 12" with a conference call at 4:30 PM ET.[1][9] The options market has priced in a ±$4.40 expected move (6.12%), but this is already baked into the 85% IV on near-term contracts. Tastylive notes that "the options market is pricing in a move of about $5 in either direction, which would be almost exactly 7%...this smaller expected move indicates that investors feel most of this call's information is already priced in."[1]

The critical insight: once earnings resolve (whether beat or miss), IV will collapse from 85% to ~29% baseline within 24 hours. This 56-point IV crush translates to immediate profit on short premium. The 74/76 call spread sits 2.8% OTM, capturing the bullish bias (Put/Call ratio 0.02 shows heavy call buying) while collecting premium from the IV crush. UBS upgraded CSCO to "Buy" with $88 target, supporting the bullish setup, but that upside is already priced into current calls.[11]

📊 Pro Analysis

• Current IV: 85% (Nov 14) vs 27.3% (Jan 16) = 57.7% IV crush potential
• IV Rank: 100% (maximum - peak selling opportunity)
• Expected Daily Move: ±$4.40 (6.12%)
• Put/Call Ratio: 0.02 (calls massively overpriced)
• Market Maker Max Pain: $75 (between your strikes)
• Technical: RSI 56.15 (neutral), Price $1.05 above 20MA (slight bullish bias)
• Unusual Activity: 28,291 contracts volume in Nov 14 74 calls alone

🔍 Earnings Date Check

⚠️ CRITICAL TIMING: Earnings TODAY (Nov 12) after market close. This trade CAPTURES the earnings move because you're selling premium BEFORE the announcement, then profiting from the IV collapse AFTER resolution. This is NOT a trade to hold through earnings—you'll close it after earnings resolve (likely within 2-4 hours post-announcement when IV collapses).

💡 Trade Management

• Entry: Sell at $0.35 limit (mid of bid/ask)
• Target: Close at $0.10 (71% profit) - execute 30 minutes after earnings call ends
• Stop: Exit if CSCO breaks above $76.50 before earnings
• Time Stop: Must close before Nov 14 3:59 PM expiry

📅 Economic Events: Earnings TODAY (Nov 12, 4:30 PM ET), CPI tomorrow (Nov 13), NFP Dec 5, Fed Rate Decision Dec 10

🔍 Market Overview

The broader market context supports this trade. Tech earnings season is in full swing with mixed results—Google hit all-time highs on strong AI momentum, but enterprise spending remains "uneven" across segments.[2] Cisco specifically faces headwinds: "The stock has traded flat year to date and is looking for a catalyst as enterprise and government networking spend remains uneven."[2] However, AI networking is the bright spot—"Orders for AI networking surpassed $350 million last quarter, and commentary around growth in that line will be critical."[2] The consensus EPS estimate is $0.91-$0.92 on $14.05B revenue, with Cisco beating estimates in four straight quarters.[2][7] This sets a high bar, meaning guidance will drive the move more than the beat. Support at $71.72 (today's low), resistance at $75 (Max Pain level). The 2.26% dividend yield ($0.41 quarterly) provides downside support but won't prevent earnings volatility.

🔒 Pricing Validation

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