CSCO Calendar Spread

Cisco (CSCO) is reporting earnings after the bell and trading a bit lower on the day with the market so far. The stock has had quite a run over the last few weeks and now sits above 22. I think even if CSCO pulls back that 20-21 is a great buying level as tech is still the leader. Just as MSFT sold off on earnings two weeks ago, it has bounced back more than a dollar higher so any dip in tech is a buy. As for CSCO, I think the play is to buy a call calendar spread at the 23 strike.

The Aug options are priced a bit higher than the Sept because of earnings bid up so we have the Aug IV near 45% and Sept IV near 36%.

I want to buy the Sept 23 call and sell the Aug 23 call. This can be done for a debit of $0.24 right now per spread.

Breakeven at Aug expy is anywhere between 21.3-25. Max profit is if the stock is at 23 at expy. You can always take the short call off after earnings and hold the Sept into a larger rally. But by selling the August you will be collecting some nice premium.