Thursday, September 17, 2015

ADBE Analysis

Update 9/30/2015: I exited ADBE as the profit exceeded half of its maximum potential, thereby eliminating a bit more than two weeks of time risk.

Shares rose by 0;4% over 13 days, or a +11% annual rate. The optons produced a +145.0% yield on debit, for a +4,071% annual rate.

The software company Adobe Systems Inc. (ADBE), headquartered in San Jose, California,  publishes earnings after the closing bell on Thursday.

[ADBE in Wikipedia]


I shall use the OCT series of options, which trades for the last time 29 days hence, on Oct 16.


Click on chart to enlarge.
ADBE at 2:52 p.m. New York time
Implied volatility stands at 36.9%, which is double the VIX, a measure of volatility of the S&P 500 index. ADBE’s volatility stands in the 61st percentile of its annual range.

Ranges implied by options and the chart
WeekSD1 68.2%SD2 95%ChartEarns
Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move

The Trade

Iron condor, short the $90 calls and long the $92.50 calls,
short the $72.50 puts and long the $70 puts,
sold for a credit and expiring Oct. 17.
Probability of expiring out-of-the-money


The premium is $0.49 which is 29% of the width of the position’s wings. The stock at the time of purchase was priced at $81.7

The risk/reward ratio is 4.2:1.

The zone of profit in the proposed trade covers a $8.75 move either way. The biggest immediate move after each of the past four earnings announcements was $6.28, and the average was $3.28.

Decision for My Account

I have opened a position on ADBE as described above.

-- Tim Bovee, Portland, Oregon, Sept. 17, 2015


My volatility trading rules can be read here.


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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