Bullish ADBE Straddle Sale

• stevenplace
• December 4th, 2008

I’ve been looking around for potential stocks to use my High-Strike-LEAP-Straddle-Sale strategy. ADBE looks good. Check out the chart:

The play is SELL -1 ADBE Jan 10 30 Straddle 14.00. Here’s the risk profile on ToS:

Delta: 18.45, Gamma -5.66, Theta 1.18, Vega -16.90

This puts your effective basis at expiration at 16, and it’s pretty easy on the margin. Breakeven points are at 16 and 44-ish. Here’s where that is on the chart:

Now ADBE can go lower, and it’s good to manage risk, but this is a good, long-term play to stick in your IRA and forget about. Owning Adobe at 16 a share isn’t bad either. As for other strategies, you could do an ITM put sale way out here, but your basis doesn’t get reduced as much so there’s more money to tie up. You could also do an ATM leap calendar strategy, but that requires a lot more trading around it and if you don’t have a good commission structure you can get chopped up in the trades.

What do you think? Good play or not?

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tickers: adbe

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