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The big bet that Cisco will sink on earnings

The big options bet against Cisco

Cisco is set to report earnings after the bell Wednesday, and analysts don't look for much—both earnings and revenue are expected to drop year over year. But one firm is making a huge options wager that the results will be even worse than investors forecast.

On Tuesday, a major options trader bought 20,000 February 21/20 one-by-two put spreads for about 8 cents each. This represents a bet that Cisco will be trading between $20 and $20.92 by the end of next week, or 8 percent to 12 percent below current levels. It thus implies an expectation that Cisco's earnings report will disappoint.

In a way, that would be a feat. The stock got crushed after its last earnings report, when it severely dampened expectations about what it would report in the next quarter. In a damning prediction, Cisco provided guidance that it would report revenues down 8 to 10 percent year over year because of weakness in emerging markets.

On the earnings side, analysts expect Cisco to report earnings per share in line with the guidance of 45 cents 47 cents it provided in November.

(Read more: Strong earnings fail to impress jittery market)

"To me, you need to see some sort of stabilization in emerging markets" for Cisco to report positive results, said Dan Nathan of RiskReversal.com. Otherwise, he added, the stock likely will range-bound between $20 and $23.

Options in the stock have been particularly hot.

"It's been a very volatile company, and a day before the report, options volume ran really high," Nathan said.

Cisco shares have moved an average of 8 percent on earnings over the past four quarters.

—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.

Follow the show on Twitter: @CNBCOptions.