Puts Pop as Adobe Systems Incorporated (ADBE) Drops

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

Mar 18, 2015 at 10:50 AM
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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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