Arista Networks Plunges 2.03%: What's Fueling the Selloff?

Summary
• Arista Networks (ANET) trades at $130.09, down 2.03% from its previous close of $132.78
• Intraday range spans $127.58 to $132.12, with volume at 5.81 million shares
• 52-week range of $59.43 to $141.99 highlights current price at 12.8% below its peak

Arista Networks faces a sharp intraday decline amid broader sector headwinds. The stock trades at its lowest level since early August, with technical indicators pointing to oversold conditions. Sector peers like Cisco (CSCO) show resilience, but ANET's 2.03% drop highlights vulnerability to macroeconomic and thematic pressures. Traders are now pivoting to defensive strategies as volatility metrics spike.

Sector-Wide Cybersecurity Concerns and AI Infrastructure Cost Pressures Amplify Selloff
The selloff stems from sector-wide concerns over cybersecurity risks and AI infrastructure cost dynamics rather than company-specific issues. Arista's exposure to high-margin AI networking solutions faces margin compression risks as cloud providers negotiate pricing. Meanwhile, elevated options activity suggests short-term positioning around $120-134 price levels. The stock's 2.03% drop aligns with broader Technology Hardware sector weakness, though its fundamentals remain intact with 30.4% Q2 revenue growth and a 40.9% net margin.

Communication Equipment Sector Mixed as Cisco Outperforms
While Arista Networks declines 2.03%, sector leader Cisco Systems (CSCO) rises 0.307%. The Communication Equipment sector faces divergent pressures: infrastructure providers like Cisco benefit from stable enterprise demand, while AI-focused peers like ANET face margin headwinds. Pure Storage (PSTG) and Seagate (STX) trade sideways, reflecting market uncertainty about AI infrastructure spending cycles. ANET's 47.45 P/E ratio remains elevated compared to sector averages, amplifying sensitivity to macroeconomic shifts.

Defensive Positioning and Volatility Plays in a Volatile Environment
• 200-day MA: $136.298 (below) • RSI: 60.74 (neutral) • MACD: -0.28 (bearish) • Bollinger Bands: 106.63-149.14 (oversold) • 52W range: 59.43-141.99 (12.8% below 52W high)

Key levels to watch: $126.73 (support) and $137.64 (resistance). With RSI at 60.74 and MACD bearish, short-term volatility is likely. The 120-strike put (ANET20250829P120) offers 173.32% leverage with 47.11% IV, ideal for downside protection. The 134-strike call (ANET20250829C134) provides 71.82% leverage with 38.97% IV for bullish exposure. Both contracts show strong liquidity (6,926 and 27,046 turnover) and favorable Greeks (theta ≥0.03, gamma ≥0.008).

• ANET20250829P120 (Put): Strike $120, Expiry 8/29, IV 47.11%, Leverage 173.32%, Delta -0.140, Theta -0.031, Gamma 0.022, Turnover 6,926
- High leverage for downside protection with moderate delta
- IV in mid-range (47.11%) suggests balanced risk/reward
- Strong theta decay (0.031) and gamma sensitivity (0.022) for volatility plays
- Payoff under 5% downside scenario: $123.59 → $3.59 profit

• ANET20250829C134 (Call): Strike $134, Expiry 8/29, IV 38.97%, Leverage 71.82%, Delta 0.337, Theta -0.334, Gamma 0.044, Turnover 27,046
- Balanced bullish exposure with 71.82% leverage
- IV in mid-range (38.97%) with strong liquidity (27,046 turnover)
- High theta decay (0.334) and gamma (0.044) for directional bets
- Payoff under 5% upside scenario: $136.60 → $2.60 profit

If $126.73 breaks, ANET20250829P120 offers short-side potential. Aggressive bulls may consider ANET20250829C134 into a bounce above $134.00.

Backtest Arista Networks Stock Performance
The 3-day win rate for ANET after an intraday plunge of -2% is 63.29%, the 10-day win rate is 71.68%, and the 30-day win rate is 82.52%. The maximum return during the backtest period was 17.07%, with a maximum return day 59 days after the plunge.

Position for Volatility: Key Levels and Sector Cues to Watch
The selloff presents tactical opportunities for both defensive and aggressive positioning. With RSI at 60.74 and MACD bearish, short-term volatility is likely, but fundamentals remain intact. Traders should monitor $126.73 support and $137.64 resistance levels. Sector leader Cisco's 0.307% gain suggests infrastructure demand remains resilient. If $126.73 breaks, ANET20250829P120 offers downside protection. Aggressive bulls may consider ANET20250829C134 into a bounce above $134.00. Watch for sector-wide cues and earnings reactions from Cisco and Broadcom to gauge near-term direction.