Todd Gordon's Cisco Options Trade

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On CNBC’s “Trading Nation,” Todd Gordon of suggested a bullish options trading idea in Cisco Systems, Inc. (NASDAQ: CSCO).

Gordon sees support for the stock in the $51 region. He noticed a double bottom pattern on the stock’s chart, which he sees as a bullish pattern. Gordon also analyzed implied volatility and he concluded that the implied volatility is overbought going into earnings. That means that options are expensive.

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To make a bullish bet ahead of earnings, scheduled for Wednesday, Gordon wants to sell the Aug. $55 put and buy the Aug. $50 put for a total credit of $2.14. If the stock trades above $55 at Aug. 16 expiration, Gordon is going to collect the premium. If the stock trades below $52.86, the trade is going to start to lose money and it can maximally lose $2.86.

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