Over the last month, selling short out-of-the-money (OTM) Cisco Systems (CSCO) put and call options has worked well for existing shareholders. Moreover, for the next month, it looks like a good play as well.
CSCO closed at $119.52 on Thursday, June 18, up slightly (1.87%). Over the last month, the stock has stayed in a narrow range, as I suggested it might in my last Barchart article. That makes it ideal for selling short covered calls and cash-secured puts.
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CSCO stock - last 3 months - Barhart - June 17, 2026 For example, the May 17 Barchart article, “Cisco Systems Reported Lower FCF and Margins - Has CSCO Stock Peaked?” discussed selling short both the June 18 expiry $130 call option and the $110.00 put option (trading price: $117.59). So, both of these were considered “out-of-the-money.”
Both are likely to expire worthless on Friday, June 18, so an investor has earned good income from shorting these options.
For example, at the time, the June 18 expiry $130.00 call option premium was $1.50, giving investors a 1.276% one-month covered call yield (i.e., $1.50/$117.59). The call option was 11% higher than the stock price, so it was “out-of-the-money.” Today, that call option premium is 1 cent and likely to expire worthless.
Similarly, the June 18 expiry $110.00 put premium was $2.12, for a strike price almost 6.5% below the trading price. That also gave investors an OTM short-put yield of 1.93% (i.e., $2.12/$110.00) for the next month. Today, it's down to just 1 cent as well.
So, it makes sense to do a new 1-month covered call and cash-secured put option play.
Moreover, analysts have raised their price targets for CSCO stock in the past month. That means we can raise the strike prices for these OTM short option plays.
New CSCO Price Targets
Last month, I discussed how Cisco Systems' stock could be worth $137.45 per share, or 16.9% higher than its existing price. That was based on revenue forecasts of $68.05 billion for the next fiscal year ending June 30, 2027, and a 20.25% FCF margin estimate. That resulted in a $13.89 billion FY 27 FCF forecast.
Since then, analysts have raised their forecasts to $68.55 billion. Using a slightly lower 20% FCF margin still results in an FCF forecast of $13.71 billion.
Next, using an average 2.5% FCF yield metric, Cisco's fair market value (FMV) could rise to $548.4 billion (i.e., $13.71b/0.025). That's 16.4% higher than Cisco's present market cap of $471.1 billion. So, my new price target (PT) is:
$119.52 price (June 17) x 1.164 = $139.12 (PT)
That's slightly higher than my prior $137.45 PT. Moreover, other analysts have hiked their PTs even more.
For example, Yahoo! Finance now shows that 26 analysts have an average PT of $126.05, up from $117.95. Similarly, Barchart's mean survey PT is $128.71, up from $89.24.
Also, AnaChart's survey PT is now $125.64, down from $128.44. The average of all three of these surveys is now $126.79, much closer to my PT than before, implying at least 6% upside.
The limited upside in these PTs suggests that investors should make additional income shorting OTM puts and calls.
Shorting OTM CSCO Puts and Calls
For example, the July 17 expiry CSCO option chain shows that investors can make good additional income shorting the following two options:
$130.00 call option, 8.3% OTM ……… midpoint premium $1.48 ………. 1.24% covered call yield (i.e., $1.48 / $119.54)
$110.00 put option, 8.4% OTM ……… midpoint premium $1.35 ……….. $1.23% cash-secured yield (i.e., $1.35/$110.00)
CSCO calls and puts expiring July 17 - Barchart - as of June 18, 2026 Both of these puts and calls are similar distances away from the trading price with similar premiums. However, the cash-secured put play has a slightly lower delta ratio, implying a lower chance that CSCO will drop over 8% to $110.00 over the next month.
The bottom line is that an investor can earn an extra 1.23% or so monthly income either shorting CSCO calls or puts. However, note that a covered call investor also can make realized or unrealized income if CSCO rises to at or below the strike price.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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