Adobe Systems (ADBE) NewsBite

Posted on Wednesday, July 02, 2008 9:09 AM

Adobe Systems (NasdaqNM: ADBE) closed yesterday at $40.38. So far the stock has hit a 52-week low of $30.70 and 52-week high of $48.47. Adobe Systems stock has been showing support around 38.52 and resistance in the 41.34 range. Technical indicators for the stock are Bearish and S&P gives ADBE a positive 4 STAR (out of 5) buy rating. ADBE appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at an Oct '08 40 covered call (AEQ JH) for a net debit in the $37.08 area. That is also the break even stock price for this trade. This covered call has a 108 day duration, provides 8.17% downside protection and a 7.87% assigned return rate for a 26.61% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the ADBE Jan '09 30 Call (AEQ AF) and selling the Oct '08 40 call (AEQ JH) for an $8.30 debit. The trade has a 108 day life and would provide 5.15% downside protection and a 20.48% assigned return rate for a 69.00% annualized return rate (for comparison purposes only). Adobe Systems does not pay dividends at this time. [IHF - Investors Observer]