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Adobe Stock Reaches All-Time High, Suggests Opportunities for Options Trades
Adobe Inc.'s (ADBE) stock has reached an all-time high of $375.51 on June 11, marking a significant milestone for the global software giant. This achievement comes amidst a favourable environment for options trades, according to analysts.
The high put biased sentiment among short-term options traders, combined with the low volatility expectations, could potentially create tailwinds for Adobe stock. Rocky White, Senior Quantitative Analyst at Schaeffer's Investment Research, has observed this pattern with Adobe stock over the past 20 years.
The 50-day put/call volume ratio of Adobe stock at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 1.11, higher than 71% of readings from the past year. This high put/call ratio, along with the low Schaeffer's Volatility Index (SVI) of 21%, could be an indication of less expected volatility in Adobe stock's price movement.
The Schaeffer's put/call open interest ratio (SOIR) of Adobe stock is 1.06, placing it in the 83rd percentile of annual readings, indicating short-term options traders have rarely been more put biased in the last 12 months.
Despite this high put bias, Adobe stock has been trading within striking distance of its 12-month moving average. Since August, the stock has been stuck between $340 and $355. However, a move of similar magnitude from the stock's current perch would put it above $368.
This pattern has occurred 18 times over the last 20 years for Adobe stock. Interestingly, one month after this pattern, Adobe stock was higher 83% of the time, averaging an 8.2% pop. After three months, Adobe stock averages a 19.3% gain in 89% of circumstances. This means the equity could see new records around $406.
The high put biased sentiment among short-term options traders could potentially be a sign of unwinding pessimism in the options pits for Adobe stock. This could create a favourable environment for options trades on Adobe stock.
It's worth noting that Adobe stock faced rejection at the $360 level twice in July. However, at least 80% of the last 20 monthly closes for Adobe stock have been above its 12-month moving average.
In conclusion, the current situation seems favourable for considering options trades on Adobe (ADBE) due to the low 12th percentile Schaeffer's Volatility Index (SVI) of 21% and the high put biased sentiment among short-term options traders. However, as with any investment, it's essential to conduct thorough research and consider seeking advice from a financial advisor.
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