Also, the company is in the process of buying Composite Software, provider of software services, for about $180 million, and the deal will be finished by Q1 of 2014. In the past year and a half, CSCO has clearly been expanding its arsenal of computing holdings as nearly 90% of the past acquisitions were software companies. In addition to general expansion initiatives, analysts also expect CSCO to report positive earnings due to increased demand for carrier routing, wireless services, and pay-per-view TV which should carry CSCO until at least the end of the year. After upping her CSCO price target to $30, Simona Jankowski, a Goldman Sach’s analyst, said, “we expect Cisco to report a solid F4Q quarter on improving enterprise networking demand, higher carrier capex, and strong execution, with EPS upside aided by better gross margins.” Another analyst for BMO Capital, Tim Long, said that “Cisco continues to execute well, and all the signs are pointing to Cisco reporting strong results. Along with an improving enterprise IT spending environment, better Telco spending will also help. We expect management to guide conservatively, but something in the range of 4% – 7% year-over-year growth … seems realistic.” Experts predict an EPS of $0.51 on total revenue of $12.40 billion, an increase of $0.71 billion from the year-earlier quarter. For the full fiscal 2013 year, analysts anticipate CSCO to have an EPS of $2.01 on revenue of $48.60 billion.
By following this system for Earnings every trade I take, I greatly improve my odds of achieving a profitable trading record over the medium and long-term. In the second half of my book, Keene On The Market: Trade to Win Using Unusual Options Activity, Volatility, and Earnings I describe this plan in much greater detail. I also discuss two other trading plans – my non-blowout trading plan for risk management, and my strategy for setting up trades for earnings reports. The first half of the book is dedicated to explaining a range of options strategies (including synthetic options), the Greeks, and other trading techniques. Signed copies are available through my website, www.KeeneOnTheMarket.com
The CSCO Aug 26 Straddle is priced at $1.75 implying the stock will move 6.7% move in either direction. I want to get long CSCO, because the chart looks great, but I want to have a good reward to risk set-up.
My Trade: Buying the CSCO August 27-28 Bull Call Spread for $.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Reward to Risk: 3-1
Breakeven: $27.25
Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long