Options Corner: Why Cisco Could Be The Silent Winner Of The Cybersecurity Surge

In any other circumstances, Cisco Systems Inc CSCO ordinarily wouldn't trigger intense intrigue. While Cisco's digital communications business — which includes a comprehensive suite of cybersecurity products and services — is incredibly relevant, it's not the most headline-friendly endeavor. That changed earlier this week and it may positively affect the forward trajectory of CSCO stock.

On Tuesday, Victoria's Secret VSCO reported a cybersecurity breach, which forced the company to shut its website down for three days in late May. At the time, the fashion industry didn't raise much fuss about the matter but for stakeholders, the breach presents a major concern. It's the latest, high-profile example of an increasing wave of corporate cyberattacks that are dragging sales, reputations and even entire business models.

On the other hand, the somewhat cynical — but ultimately pragmatic — response is to consider cybersecurity-focused investments such as CSCO stock. Fundamentally, companies in the space stand to benefit from an expanding total addressable market. Per Statista, the U.S. government has allocated almost $13 billion of budgetary spending on cybersecurity, a 10% bump from last fiscal year. It's a clear sign that cybersecurity is a necessity, not a luxury.

The catalyst of need harkens back to an argument that Ritholtz Wealth Management's Josh Brown made earlier this year. IN the first few months of 2025, the cybersecurity sector was outperforming the broader tech index. Brown gave a blunt assessment for the superior returns.

"This is the one line item that no company in the world is cutting. I don't give a sh-t how bad the recession gets. This is out-of-business risk," Brown said Tuesday on an episode of The Compound's "What Are Your Thoughts?"

Essentially, the Victoria's Secret breach reminded investors why cybersecurity matters and CSCO stock is tagging along for the ride.

Statistical Argument Shines A Bright Spotlight On CSCO Stock

Although the underlying narrative of CSCO stock implies forward progress, storylines and even price action are not the most reliable predictors of equity performance. That's because the traditional approaches of fundamental and technical analysis — though they have their utility in certain contexts — suffer from the non-stationarity problem.

Essentially, metrics such as earnings per share or share price tend to drift or fluctuate, especially with long passages of time or shifts in sentiment regimes. In addition, administrative factors such as dilution and buybacks can distort the meaning of the metrics that are being used for comparison. At the end of the day, it's difficult to make apples-to-apples comparisons over time and context.

On the flipside, market breadth — which basically boils down to studying patterns of accumulation and distribution — is a discrete state or concept. Market breadth is a representation of demand and demand is binary. It's either happening or it's not. Binary events can be easily categorized and quantified, therefore facilitating projectability.

In statistical language, market breadth features stationarity: the core statistical property of market demand does not evolve over time. What does evolve are the patterns of demand — and these patterns can be analyzed to better determine probabilistic frameworks.

For CSCO stock, the security is currently printing a "6-4-U" sequence: six up weeks, four down weeks, with a net positive trajectory across the 10-week period. Over the past decade, in 56.76% of cases, the following week's price action results in upside, with a median return of 1.53%.

Assuming that this week closes at $66, CSCO is on track to reach $67 in short order, perhaps in a week or two. If the bulls maintain control of the market, it's not inconceivable that the optimists will attempt to push the price toward the $67 level.

Setting Up A Tempting Call Spread On Cisco

For traders willing to roll the dice on the above statistical framework, the 66/67 bull call spread expiring June 27 is particularly tempting. This transaction involves buying the $66 call and simultaneously selling the $67 call, for a net debit paid of $52. Should CSCO stock rise through the short strike price at expiration, the maximum reward is $48, a payout of over 92%.

Notably, the high payout suggests that market makers believe the upswing in CSCO is a fluke, which isn't an unreasonable assessment. As a baseline, the chance that a long position in the security will be profitable over any given week is 53.12%. That's an upward bias but a modest one. What makes the 6-4-U sequence appealing is the implied sentiment shift. Here, the bulls receive nearly 4 percentage points of free odds in their favor.

To be clear, the chance of downside is still high at over 43%. Nevertheless, in blackjack terms, the deck is warm, which in this case incentivizes a bullish debit-based strategy.

The opinions and views expressed in this content are those of the individual author and do not necessarily reflect the views of Benzinga. Benzinga is not responsible for the accuracy or reliability of any information provided herein. This content is for informational purposes only and should not be misconstrued as investment advice or a recommendation to buy or sell any security. Readers are asked not to rely on the opinions or information herein, and encouraged to do their own due diligence before making investing decisions.

Read Next: