Red-Hot Adobe Stock Sees Surge in Bullish Betting

ADBE's December 320 call is in high demand today

Dec 13, 2019 at 3:14 PM
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Options volume is running quick on Adobe Inc (NYSE:ADBE) stock today, as the shares surge in the wake of the Photoshop maker's earnings report. In its fiscal fourth quarter, ADBE recorded an adjusted profit of $2.29 per share on $2.99 billion in revenue -- more than analysts were expecting. This is offsetting a lower-than-anticipated current-quarter revenue forecast, and has Adobe shares up 4.6% to trade at $319.98, fresh off a record high of $321.73.

Meanwhile, in the options pits, more than 80,000 contracts have changed hands -- five times what's typically seen at this point, and volume pacing in the 98th annual percentile. Day traders are buying to open new positions at the weekly 12/13 320-strike call, targeting bigger gains through expiration at tonight's close.

Elsewhere, slightly longer-term traders appear to be purchasing new positions at the December 320 call for a volume-weighted average price of $3.71. If this is the case, breakeven for the call buyers at the close next Friday, Dec. 20, when front-month options expire, is $323.71 (strike plus premium paid).

Today's heavy call buying marks a change of pace for ADBE options traders. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.18 ranks in the 92nd annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip.

Given Adobe's strength on the charts, though, it's possible some of this recent put buying came at the hands of shareholders hedging against any post-earnings downside risk. Heading into today's trading, ADBE stock was up nearly 18% since taking a sharp bounce off its 320-day moving average in late October. Plus, today's gap helped the shares slice through the $310 region, which had previously marked tops for the equity.

adbe stock daily price chart on dec 13


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