Adobe Earning’s Breakdown & Play – (9/12)

Adobe earning's are Thursday after-hours, this is going to be a huge opportunity. My goal will be to take a far OTM contract to near ATM, to begin to sell weeklies for huge premium.

ANALYSIS:

1. Massive gap on the daily back in June starting $470 running all the way to $505, this is too big of a gap imo will be filled.
2. Strong prior support/resistances at $490-$500, suspect support will be found here, plausibly dumping to $470 and retracing back to this zone.
3. Most importantly huge double top formation on the daily.

FUNDAMENTALS:

1. There's a massive lawsuit from the FTC claiming Adobe is trapping subscribers, supposedly millions of users are deleting their accounts, recent video by Logically Answered explaining it.
2. The estimated EPS is $4.10, past two quarters was $4.39. This is a massive drop, this estimate won't be .30c off, even if it's slightly wrong that's a massive drop reflecting issues internally.

Suggested implied move is 7%, the last two quarters has been 13.6% and 14.5%, went with the range of 13%. So with all of this information taken into consideration, suspect Adobe will see an implied move between 12%-16%. This means price will dump between $490 to $470, bullish case puts us back to $630 retesting previous high of the year. (Am very much leaning towards bearish case, but price could trade flat or even be bullish. I'm not a fortune teller and won't gamble a direction.)

Strategy: Double calendar $485/$630 (9/13-9/27)

After earning's move, placing these otherwise far OTM cheap contracts near ATM or even ITM, now I can begin to sell covered puts/calls for massive Theta. Just one weekly with Adobe can pay nearly four times my original debt paid. I'd get to sell two weeklies with this set-up, void a flat ER.

That's it. That's my analysis, fundamentals, implied move, and strategy with aim to sell Theta and not just take the initial profit after the directional move, going for the real gains.

TECHNICALITIES: If want to get technical, am opening the call side like an iron condor buying $635, selling $625, big spread loss now but can roll and do not expect bullish price action, this set-up makes the cost extremely cheap but still can gain a big bullish directional move should it happen. I will possibly add $475 OTM put 10/18 maybe open as a calendar picking direction as am confident in my thesis. Will open opposite side after the ER directional move, so if we dump to $480 then will open $520c, so I do not lose my profit from the original directional move, it'll start to profit while my long legs decline; which are still paying me crazy Theta!