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Trade of the Day: Cisco Systems (CSCO)

Make your bearish bets early, since markets will likely react to debt ceiling talks

   

Cisco Systems (CSCO) has been accelerating to the downside recently as more and more major reversal patterns appear around the market. The break at this level (and a completed head-and-shoulders pattern) makes it much more likely that the stock will fill the gap and reach $21 per share.  Traders are fairly split on this stock right now based on the chain sheet, but there is an unusually large amount of volume in the out-of-the-money puts expiring in December. This conforms to our analysis as well. We recommend opening a new position here, as selling could accelerate even more this week as traders deal with the budget/debt ceiling crisis and the labor report.

As usual, set a limit order to avoid paying too much for the option. Market orders can drive the price up very quickly and increase the hurdle required to get to a profitable position.

Recommendation:
‘Buy to open’ the CSCO November 23 Puts (CSCO131116P00023000) for a maximum price of 92 cents.

InvestorPlace advisors John Jagerson and S. Wade Hansen are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news.  Get in on the next trade and get 1 free month today by clicking here.

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Article printed from InvestorPlace Media, http://investorplace.com/2013/09/trade-of-the-day-cisco-systems-csco-2/.

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