Adobe Systems (ADBE): Q4 Earnings Beat to Fuel Further Momentum
Two recent analyst upgrades suggest there is potential for a 10% upside in Adobe Systems stock price as BMO Capital Markets have recently raised their price targets to $205 and BofA have set a target of $220.
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Technicals
The technical outlook for ADBE is encouraging. The stock posted a steady rally throughout 2017 for an annual gain of roughly 70%. ADBE corrected lower in late November but bounced back after a test of horizontal support at 165.50 from a prior gap. It has since recovered back above the 50-period daily moving average and is on the verge of breaking to new highs, suggesting the uptrend has resumed.
*source Tradingview.com
If you agree there's further upside ahead for Adobe Systems, consider this trade which is a bet that the stock will continue to advance, or at least not decline very much over the next six weeks.
Buy To Open ADBE 16Feb18 180 Puts (ADBE180216P180)
Sell To Open ADBE 16Feb18 185 Puts (ADBE180216P185) for a credit of $1.85 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when ADBE was trading near $185. Unless the stock rallies quickly from here, you should be able to get close to this amount.
If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee). Each contract would then yield $183 and your broker would charge a $500 maintenance fee, making your investment $317 ($500 – $183). If ADBE closes at any price above $185 on February 18, both options would expire worthless, and your return on the spread would be 58% (540% annualized).
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Changes to Investor’s Business Daily (IBD) Top 50 This Week:
We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run. Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.
As with all investments, you should only make option trades with money that you can truly afford to lose.
Happy trading,
Terry
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Any questions? I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts. seth@terrystips.com
You can see every trade made in the actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here. Why wait any longer to make this important investment in yourself? I look forward to having you on board, and to prospering with you.
Terry
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