On The Road Again
Today I am on the road to beautiful
San Francisco! We were happy to see that the Qualcomm
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PowerRating)
spread that we talked about earlier in the week has expanded. Qualcomm did
what we thought and came out with better-than-expected earnings. And as a
result, Qualcomm is up strongly today. The 70 Call Spread has already
expanded to 3 3/8, so anybody who got in at the 2 1/2 level is happy and making
money. Congratulations!
Today we are looking at Cisco
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PowerRating). Can Cisco keep up their
great performance of 18 consecutive winning quarters? The traders would like a
cheap way to play Cisco and are looking at the Dec 55-65 Call Spread. They may buy the Dec 55 Calls, which are trading at about 68 volatility, and sell
the Dec 65 Calls, which are trading at about 72 volatility. If volatility
goes back to normal, which is around 52, and they had purchased one of these
calls naked, they would be a big loser. But with the Dec 55-65 spread one can neutralize volatility and time decay. The risk/reward ratio looks very
attractive being that Cisco’s earnings will be coming out Monday.
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