Tony Zhang's Cisco Trade

On CNBC's "Options Action," Tony Zhang said that 2020 is going to be a turnaround year for Cisco Systems, Inc. CSCO. He thinks that the stock is currently fairly valued, but he expects it to break out $48 on earnings. The company is going to report on August 12.

Zhang said that the options market is implying a move of 5.8% move in either direction and its average move on earnings is 7.4%. To capture a potential breakout, Zhang wants to buy the $47.50/$52.50 call spread for a total cost of $1.50.

The trade breaks even at $49 or 3.31% above the closing price on Friday and it can maximally make a profit of $3.50.