Adobe Systems Incorporated
) saw a notable surge in put activity yesterday, as roughly 28,000
contracts crossed the tape throughout the session. This was about
11 times the security's average single-session put volume, and more
than six times the number of calls exchanged. However, not all of
yesterday's put action was of the bearish variety.
Most popular was the January 2014 45-strike put, where north of
6,000 contracts -- including several mid- to large-sized blocks --
changed hands at the
, suggesting they were
. To be more specific, these out-of-the-money puts traded for a
volume-weighted average price of $0.66. Meanwhile, open interest at
this strike jumped by 4,915 contracts overnight, confirming the
creation of new short positions.
In other words, the speculators are counting on the software
concern to remain north of the $45 level through the close on Jan.
17, 2014. This would render the options worthless, and allow the
sellers to retain the initial premium collected. At last check, the
delta for the put stood at negative 0.16, implying it has just a
16% chance of moving into the money by January options expiration.
Still, if the stock does, in fact, sink below the strike price
during that time frame, the traders could find themselves on the
hook to buy the shares at $45 each, no matter how low ADBE sinks.
This confidence in Adobe Systems isn't unfounded, considering the
shares have climbed north of 39% year-to-date -- and 57.5%
year-over-year -- to trade at $52.60. What's more, the firm is
tentatively scheduled to report quarterly earnings after the market
closes on Thursday, Dec. 12. Over the past eight quarters, Adobe
has averaged a positive return of 3.6% the day after posting its
This article by Terri Stridsberg was originally published on
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