Adobe Systems Incorporated, ADBE, earnings, options, volatility, iron condor
The Volatility Option Trade After Earnings in Adobe Systems Incorporated
Adobe Systems Incorporated (NASDAQ:ADBE) : The Volatility Option Trade After Earnings
LEDE This is a slightly advanced option trade that starts two calendar days after Adobe Systems Incorporated (NASDAQ:ADBE) earnings and lasts for the 19 calendar days to follow, that has been a winner for the last 3 years.
Adobe has earnings due out around September 19th, but that is not a confirmed date -- just be aware that the announcement is in the next few weeks.
Adobe Systems Incorporated (NASDAQ:ADBE) Earnings
While we have had tremendous success by recognizing the pre-earnings momentum pattern that has over taken this bull market, we do need to consider a broad portfolio of option investments -- and in this case we look at a back-test that is direction neutral.
For Adobe Systems Incorporated, irrespective of whether the earnings move was up or down, if we waited two-days after the stock move, and then sold a 3-week at out of the money iron condor (using monthly options), the results were quite strong. This trade opens two calendar after earnings were announced to try to let the stock find equilibrium after the earnings announcement.
We can test this approach without bias with a custom option back-test. Here is our earnings set-up:
* Open the short iron condor two calendar days after earnings
* Close the iron condor 21 calendar days after earnings
* Use the options closest to 30 days from expiration (but at least 21-days).
And a note before we see the results: This is a straight down the middle volatility bet -- this trade wins if the stock is not volatile the three weeks following earnings and it will stand to lose if the stock is volatile.
If we sold this 30/10 delta iron condor in Adobe Systems Incorporated (NASDAQ:ADBE) over the last three-years but only held it after earnings we get these results:
Past performance is not an indication of future results.
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