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Adobe Systems Incorporated (ADBE) Call Buyers Active Ahead of Earnings

Adobe Systems Incorporated (NASDAQ:ADBE) will report earnings after tonight's close

Jun 21, 2016 at 10:35 AM
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Call buying has been an increasingly popular strategy on Adobe Systems Incorporated (NASDAQ:ADBE), ahead of the software company's quarterly earnings report. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ADBE stock's 10-day call/put volume ratio has jumped to 2.50 from 1.54 over the past two weeks, and now ranks in the bullishly skewed 92nd annual percentile.

Echoing this call-skewed backdrop is ADBE's Schaeffer's put/call open interest ratio (SOIR) of 0.73. Not only does this show that call options outweigh put options among contracts expiring in the next three months, but it rests lower than 62% of all comparable readings taken in the past year. In other words, short-term speculators are more call-heavy than usual toward ADBE.

Drilling down, a number of these near-term call players have targeted the century mark, with the July 100 call ADBE's largest open interest position. Specifically, 4,137 contracts are currently in residence at this front-month near-the-money strike, 1,941 of which have been added in the past 10 sessions.

According to the major options exchanges, though, there's been a near-equal amount of buy- and sell-to-open activity that's happened here in recent months. For those buying to open the calls, the goal is for ADBE to settle north of the century mark by the close on Friday, July 15 -- when the front-month series expires. Conversely, those selling to open the calls expect $100 to serve as a short-term ceiling for the shares.

Technically, the stock made its first foray north of $100 on May 26, and topped out at a record high of $100.56 on May 31. More recently, ADBE took a sharp bounce off its 40-day moving average after pulling back from this notable milestone, and was last seen at $98.81 -- up 20% year-over-year.

ADBE daily chart

While Adobe Systems Incorporated (NASDAQ:ADBE) will take its late-season turn in the earnings confessional after tonight's close, results for sector peers salesforce.com, inc. (NYSE:CRM) and Oracle Corporation (NYSE:ORCL) were well-received. Autodesk, Inc. (NASDAQ:ADSK) and Microsoft Corporation (NASDAQ:MSFT), on the other hand, both slumped in the wake of their results. Nevertheless, the options market is pricing in a 6.2% post-earnings swing for ADBE -- slightly higher than the 4.2% move the stock has averaged in the session subsequent to reporting over the past eight quarters.

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