Stocks quoted in this article:
Option Brief: Standard & Poor's upgraded its credit rating for Adobe Systems Incorporated (NASDAQ:ADBE) to A- from BBB+ today, and removed the company's previous ratings from its CreditWatch list. Nevertheless, the security has backpedaled from Friday's earnings-induced highs this afternoon, with the shares off 3.7% to hover at $58.65. Meanwhile, bearish traders are converging on the software issue, as nearly 8,100 puts have crossed the tape -- almost five times the expected intraday pace.
The front-runner thus far is the December 57.50 strike, where 1,937 puts have changed hands -- a hefty portion of them at the ask price, suggesting they were purchased. Because today's volume at this strike has exceeded current open interest levels, and implied volatility has ticked higher, it's likely that fresh pessimistic positions were added here.
In other words, the speculators are counting on ADBE to fall south of the $57.50 level by this Friday's closing bell, reflecting a drop of about 2% from the stock's present perch. At last check, the delta for this put was last seen at negative 0.25, suggesting it has a 1-in-4 chance of being in the money by week's end. Should the shares remain north of the strike price during this time frame, the put buyers will simply lose the premium paid for their long positions.