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Getting paid to wait on Adobe
Summary: Selling a cash-secured put on Adobe ahead of next week’s earnings offers a conservative way to generate income or buy shares at a discount. With elevated option premiums and a history of post-earnings stock dips, this strategy suits long-term investors looking for a lower entry point.
Getting paid to wait on Adobe
Adobe (ADBE:xnas) is set to report its earnings on Thursday, 11 September, after the U.S. market closes. This event often causes the stock to move sharply, up or down. Interestingly, even when the company beats expectations—as it did last quarter—the stock has still fallen afterward. In fact, Adobe shares dropped in 8 of the last 12 earnings releases. That’s why some long-term investors may prefer to wait and get paid for it—by selling a put option at a lower price.
A simple strategy for income or entry
If you're thinking about owning Adobe but not at today's price, there's a way to potentially buy it cheaper—and get paid while you wait. The strategy is called a cash-secured put. It means you sell a promise to buy the stock at a lower price, and in return, you receive a cash payment up front. You must have enough cash in your account to buy the shares if needed.
Right now, Adobe trades around USD 345.63. One option is to sell the 320 strike put, which expires just after the earnings report, on Friday, 12 September.
- Strike price: USD 320 (this is the price you'd be willing to buy the stock)
- Expiry date: 12 September 2025
- Premium received: ~USD 6.90 (or USD 690 per contract)
- Cash required: USD 32,000 (enough to buy 100 shares at USD 320)
- Break-even price: USD 313.10 (320 minus the premium received)
This setup gives you a buffer of about 9% below the current stock price.
Important note: The strategies and examples described are purely for educational purposes. They assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor must conduct their own due diligence, considering their financial situation, risk tolerance, and investment objectives before making decisions. Remember, investing in the stock market carries risks, so make informed decisions.
Why now is a good moment
Right before earnings, option prices tend to rise. This is because the market expects bigger moves, and that extra uncertainty is reflected in higher option premiums. This is known as implied volatility, and as a seller of options, you benefit from it.
We can estimate the expected move by looking at the prices of both the call and put options near the current share price—a method known as the straddle. Right now, the market expects Adobe to move about USD 30.5 in either direction, or ±8.8% by Friday. That suggests an expected range between USD 315 and USD 376.
The 320 put sits just above the lower edge of that range. Unless Adobe drops more than expected, there's a good chance the option expires without requiring you to buy the shares—and you keep the full premium.
What happens if the stock falls?
If Adobe closes below USD 320 at expiry, you may be assigned, which means you'll be required to buy 100 shares at that price. But remember, you already received USD 690, so your effective purchase price is USD 313.10.
If you were planning to buy Adobe anyway, this could be a better entry point. And once you own the shares, you can continue earning income by selling covered calls—another conservative strategy.
What are the risks?
No investment is risk-free. Here’s what to keep in mind:
- Earnings surprise: If results disappoint, Adobe could fall much more than expected.
- Assignment: You might end up buying the stock even if it drops sharply.
- Cash commitment: You must have enough funds to buy 100 shares if assigned—USD 32,000 in this case.
You can limit risk by only selling puts on stocks you’re comfortable owning, and by sizing your trades so that one assignment won’t overwhelm your portfolio.
Who is this for?
This strategy is designed for long-term investors who:
- Want to buy Adobe at a lower price
- Have the cash ready if needed
- Prefer to earn income while waiting
- Don’t want to speculate on the short-term earnings reaction
You don’t need to be a trader. This is a practical way to build a position in a stock you believe in, with less risk than buying outright.
Summary
- Adobe reports earnings on 11 September (after market)
- The stock has often dropped after earnings, even on good results
- Selling the 320 put brings in USD 690 in income
- You’ll either keep the cash or buy shares at an effective price of 313.10
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This material is marketing content and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..