Cisco, CSCO Stock disappointed investors last night and although the other half of my options trade has gone bad, that doesn’t mean we can’t still make a little money. Here’s how!

It wasn’t supposed to happen the way it did. Cisco was supposed to report another huge quarter. If you don’t believe me, look at the amount of call options sold going in to earnings. The options market doesn’t often get it wrong but this time it did and I went right along with them.

If you read part I of my post (click here to read it) you know that I more than doubled my money when the option premium went up as investors purchased it. When this happened, I took half of my profit and left the other half of the trade on the table. I also started an equity position in the name.

Last night, Cisco reported soft earnings and as a result of that and a less than positive conference call, shares plunged 10% in afterhours trading. (Yes, I said 10%) Today, CSCO stock ended the day down more than 9% and the options price plunged more than 90%. (Yes, I said 90%)

Of course, that’s terrible for the other half of my trade but there are some positives. First, I already made money on the first part of the trade so even with the day today, I didn’t lose any money. (It was actually more than half of the position that I cashed in prior to earnings)

Next, I never waiver from one of my big rules: Never invest, stocks or options, in a company that you don’t believe in for the long term. This means that while I purchased stock yesterday, should it not recover for a while, I now own a high quality company and I’m fine with that.

Finally, a high quality company dropped 10% today. In fact, $4 billion in market cap was lost. That’s WAY overdone! Guess what I did today? I BOUGHT MORE! A company like Cisco at a 10% discount, you better believe I’ll take it!
I also made two other purchases today:

1.) I purchased the Aug 22 call in Cisco. I believe there will be value investors will show up before expiration and I can make some money back.
2.) I purchased the Aug 19 call in EMC. EMC is another one of my favorites in the tech space and it was down 5% today largely because of Cisco. I fully expect this name to bounce before expiration.

These contracts are cheap right now. About $20 each!
Here’s what you should learn from this: Big moves to the downside in high quality companies are buying opportunities. Don’t let them pass you by. Don’t panic. As long as you’re happy to hold the names, you’re in the driver’s seat and still, CSCO stock is a buy!