Adobe Systems (ADBE) Trading Lower On Heavy Volume

Adobe Systems (NASDAQ: ADBE) closed yesterday at $35.85. So far the stock has hit a 52-week low of $15.70 and 52-week high of $37.15. Adobe Systems stock has been showing support around 34.96 and resistance in the 36.44 range. Technical indicators for the stock are Bullish and S&P gives ADBE a neutral 3 STAR (out of 5) hold rating. ADBE appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 35 covered call (ABJ DG) for a net debit in the $32.55 area. That is also the break even stock price for this trade. This covered call has a 128 day duration, provides 9.21% downside protection and a 7.53% assigned return rate for a 21.46% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the ADBE Jan '11 20 Call (VAE AD) and selling the Apr '10 35 call (ABJ DG) for a $13.25 debit. The trade has a 128 day life and would provide 7.25% downside protection and a 13.21% assigned return rate for a 38.00% annualized return rate (for comparison purposes only). Adobe Systems does not pay dividends at this time.

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