On March 23, ADBE reported earnings that slightly exceeded estimates in both sales and profits. In addition, the company has raised its profit and sales forecast for the fiscal year. In response, several analysts have raised their price targets. Despite the positive news, the share price was sluggish in the two days following the report. Perhaps that was a reaction to the 10% rally that began two weeks before winning.
However, after those two days, the stock resumed its profit and gained ground over four of the next five days. In doing so, ADBE exceeded its 50-day and 200-day moving averages. In addition, the 50-day rate is rolling back into an upward trend for the first time since the end of October. The stock is now on a 15% rally from the March 8th low with no resistance areas to the 505 level, the November, December and January high. That leaves room for another 5% of the uptrend.
If you’re okay with ADBE staying above its 50-day and 200-day moving averages, consider the following trade, where the stock will stay above $ 475 to the expiration in seven weeks.
Buy to Open ADBE 21May21 470 Put (ADBE210521P470)
Sale to open ADBE 21May21 475 Put (ADBE210521P475) for $ 1.90 credit (sale of a vertical)
This balance is $ 0.02 below the midpoint of the options spread when ADBE was trading above $ 483. If the stock doesn’t recover quickly from here, you should be able to get close to that amount.
Your commission on this trade is only $ 1.30 per spread. Each spread would then be $ 188.70. This trade reduces your purchasing power by $ 500 and brings your investment to $ 311.30 ($ 500 – $ 188.70). If ADBE closes above $ 475 on May 21st, both options will expire worthless and your return on the spread will be 61% ($ 188.70 / $ 311.30).
Your commission on this trade is only $ 1.30 per spread. Each spread would then be $ 188.70. This trade reduces your purchasing power by $ 500 and brings your investment to $ 311.30 ($ 500 – $ 188.70). If the DRI closes above $ 145 on May 21st, both options will expire worthless and your return on the spread will be 61% ($ 188.70 / $ 311.30).
As with all investments, you should only trade options with money that you can really afford to lose.
Have fun trading,
Tags: ADBE, Adobe, Bearish Options Strategies, Bullish Options Strategies, Income Options Strategy, Monthly Options, Portfolio, Profit, Profits, Puts, Risk, Vertical Put Spread, Weekly Options
This entry was posted on Monday April 5th, 2021 at 2:59 pm and is filed under Last Minute Strategy, Monthly Options, Stock Option Trading Idea of the Week, Weekly Options.