The Fat Lady May Have Sang For Cisco, But What About CBE?

Well, the fat lady sang, and it’s still not over!
That’s about the situation here on the options trading floors after Cisco
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earnings report and subsequent revenue warning.
I say it’s not over because both bulls and bears are caught in that netherworld
of the range-bound market.

Bears are saying the risk is still to the downside, but they are having a harder
time finding which battered stock is worth being short at these levels. CSCO
at $18.50? Perhaps, but with the networking kingpin already down 74%, you may
want to look for fatter cows.

Bulls point to further Fed action, lowered expectations and lack of short
sellers as reasons conditions favor buyers rather than sellers. The simple fact
is neither side can make a very compelling case, and thus, the investing public
seems to be staying out of the game completely.

The most interesting active option class today has been Cooper
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, which rejected an unsolicited bid from Danaher
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. When DHR made the bid
for CBE last week, CBE
was trading for $41.51, but shares of the maker of electrical distribution
equipment and industrial power tools had surged to $54 as of yesterday’s

Apparently, investors believe, as do Cooper’s board of directors, that the company
is worth substantially more, since today’s action has carried CBE
to $60.32. However, traders are
voting with their wallets, selling August 60, September 60, October 60 and
January 60 calls. Traders certainly do seem to be picking a top after the 45%
run, but we caution that where there’s smoke, there’s still fire.

A quick look back by our computers showed that the average daily volume for CBE
options was a dismal 94 contracts per day prior to the August 1
hostile bid. Since then, CBE has averaged
5951 contracts per day. Today we’re tracking 36,801 calls and puts trading.
As I said, this takeover saga looks to us to be far from over.