ADBE Analysis

Adobe Systems Inc. (ADBE)

ADBE publishes earnings on Thursday after the closing bell.

Update 12/19/2016: Implied volatility dropped sharply after earnings were published while the stock price remain little changed from the entry price.

Under my rules I manage iron fly positions at 25% or better of the maximum potential profit. I exited at 26%.

Shares rose by by a penny over four days, or a 0.9% annual rate. The options position produced a 35.7% yield on debit for a +3,260% annual rate.

I shall use the JAN series of options, which trades for the last time 36 days hence, on Jan. 20.

Implied volatility stands at 33%, which stands in the 46th percentile of its annual range and the 97th percentile of its most recent broad move. The price used for analysis was $105.08.

Iron fly, short the $105 calls and long the $115 calls,

short the $105 puts and long the $95 puts,

sold for a credit and expiring Jan. 21.

Probability of expiring out-of-the-money

JAN Strike OTM Δ
Calls 105 52,5% 51
Puts 105 47.3% 40

\The premium is $6.04, which is 60% of the width of the position’s wings.

The risk/reward ratio is 0.7:1.

Decision for My Account

I have entered a position on ADBE as described above. The stock at the time of entry was priced at $105.03.

— Tim Bovee, Portland, Oregon, Dec. 15, 2016

2 thoughts on “ADBE Analysis

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