Puts Pop as Adobe Systems Incorporated (ADBE) Drops

Adobe Systems Incorporated (ADBE) puts are trading at 46 times the average intraday pace

by Karee Venema

Published on Mar 18, 2015 at 10:50 AM
Updated on Jun 24, 2020 at 10:16 AM

Adobe Systems Incorporated (NASDAQ:ADBE) is off 2.5% at $77.72, as the company's lower-than-expected current-quarter outlook overshadows a strong fiscal first quarter and price-target hike to $85 from $80 -- territory yet to be charted -- at Evercore ISI. In the options pits, speculators have taken the glass-half-empty approach, and are scooping up puts at a rate 46 times the average intraday pace. Meanwhile, in the wake of last night's scheduled event, the equity's 30-day at-the-money implied volatility has plunged 24.5% to 24.5%.

Drilling down on specific strikes, ADBE's March 72.50 put has seen the most action. It appears the majority of positions are being bought to open, as traders gamble on a steeper slide through week's end, when the front-month series expires. Should the stock be sitting north of the strike at Friday's close, today's put buyers can rest easy knowing the most they stand to lose is 100% of the premium paid.

Today's accelerated put activity marks a change of pace in ADBE's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ADBE's 50-day call/put volume ratio of 2.71 ranks in the 97th annual percentile. Simply stated, calls have been bought to open over puts at a faster clip just 3% of the time within the past year.

Technically speaking, the stock has enjoyed a lift higher from its 40-week moving average for more than three years. More recently, a sharp bounce off this historically significant trendline in early February helped send Adobe Systems Incorporated (NASDAQ:ADBE) to a record high of $80.30 on Feb. 27. Meanwhile, today's slide is being contained by ADBE's 40-day moving average, currently located at $75.53.

Weekly Chart of ADBE Since January 2012 With 40-Week Moving Average

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