Going Long on Adobe Systems (ADBE)

Adobe Systems Inc. (NASDAQ: ADBE) did not announce any news yesterday and is not scheduled to announce earnings figures until mid-March, but at least one investor thought no news was good news and sold a later-dated risk reversal.

An investor sold the July 32-42 risk reversal roughly 6,500 times and collected three cents on the transaction. In this trade, the investor sold the 32 puts, and simultaneously bought the 42 calls. The out-of-the-money July 32 puts gained five cents on the day to $1.45, and were home to current open interest of 30 contracts, while the out-of-the-money July 42 calls declined 20 cents to $1.35 and had 273 contracts of current open interest at the close Thursday. The volume versus the open interest tells us this is a new position for the investor as opposed to someone closing and taking profits.

This investor traded this risk reversal, or bull synthetic, as a play to call for further upside in the stock. ADBE shares closed down 76 cents, or 2%, to $36.86 on the day. The investor who traded this bull synthetic needs the stock to move sharply above the 42 strike to start to make significant profits at expiration. But the investor does not have to wait until July to make money, as the spread will go his way if the stock begins to rally at all.