Investors are watching earnings as Alphabet (GOOG) and Tesla (TSLA) are scheduled to announce their earnings this week. Adobe, Inc. (ADBE) is scheduled to announce earnings later in September and its stock price is trending flat now. Plus, investors are currently discounting options on ADBE for the September 20th expiration if the stock continues to behave the way it did after earnings reports since 2023.
This trade may not be for everyone because ADBE’s stock price is high, and investors are pushing options prices higher in anticipation of the earnings report in September. That said, the at-the-money options for September 20th expiration are trading near a 20% discount to their value if the stock continues to behave as it has after previous earnings reports.


This Volatility Term Structure for ADBE shows us the implied volatility of the at-the-money options for the September 20th expiration are a little bit higher than normal volatility expectations. To learn more about Volatility Term Structure, click here. That is because investors know that ADBE will announce earnings just before the September 20th expiration. That said, investors are still underestimating the size of the potential move ADBE can make after an earnings report.

This MDM graph compares the modeled expectations of current options prices (the orange line) to the actual movement of ADBE’s stock price over the past 2 years. You can see that the actual behavior (the blue histogram) shows us that ADBE made big moves more frequently than the modeled options prices expect. If this graph looked only at moves that ADBE made after earnings reports since 2023, this graph would look even more attractive.

This Volatility Cone shows us that the volatility expectations (the yellow dots) are all below the 2-year historical volatility average. To learn more about the Volatility Cone, click here. This confirms that ADBE options are all relatively inexpensive including those for the September time period that includes an earnings report.

ADBE is trending flat. Volatility expectations are lower than they should be given the size of the moves the stock makes around earnings announcements. That said, September tends to be a more volatile month as investors come back to trading after the summer vacation season ends. We like the profit potential of buying ADBE options for September 20th expiration.
To get the details on today’s trades, be sure to read today’s ODDS Online Daily Option Trade Idea.

To access Odds Online Daily and be able to see any stock you are tracking in this software, click here.
Thank you,
Don Fishback
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