Consider Adobe (ADBE) Following Its Q2 Earnings Beat
Adobe soared to record highs after its recent earnings beat and several analysts expect that the momentum will continue. Here are two of them – 3 Stocks to Buy and Hold for Decades and Adobe Is a Buy Despite High Valuation.
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Technicals
Adobe has broken above two important horizontal levels in June. The first price point at $270 is derived from a monthly chart and marks resistance that held the stock lower in 2018. So far, the stock has managed to hold above it, on a monthly basis, for three months now. The second level falls at $286 and marks a horizontal level that has acted as both support and resistance. With the 20-day moving average converging towards the level, this is an area that is likely to hold some buyers.
*source Tradingview.com
If you agree there's further upside ahead for ADBE, consider this trade which is a bet that the stock will continue to advance over the next five weeks, at least a little bit.
Buy To Open ADBE 2AUG19 292.5 Puts (ADBE19082P292.5)
Sell To Open ADBE 2AUG19 295 Puts (ADBE19082P295) for a credit of $1.10 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when ADBE was trading near $295. Unless the stock rallies quickly from here, you should be able to get close to this amount.
Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $107.50 and your broker would charge a $250 maintenance fee, making your investment $142.50 ($250 – $107.50). If ADBE closes at any price above $295 on August 2, both options would expire worthless, and your return on the spread would be 75% (855% 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
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Even better, you can become a Terry’s Tips Insider, and receive all our educational reports and materials absolutely free by opening a new account at the best options broker around - thinkorswim. If you open an account with our link, they will give you 60 days of free trading or up to $600, the same deals they give to everyone who opens an account with them. You must use this link to sign up - open thinkorswim account – and once you have funded your account with at least $3500, email Seth@TerrysTips.com and let him know that you have done it, and this is what he will do – sign you for our Premium Service package ($119.95 value plus an extra 4 months of our Premium Service, valued at another $190.80). You get $300.65 worth of services without paying us one penny.
I look forward to having you on board, and to prospering with you.
Terry
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