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Generating Income on Adobe (ADBE)

John Jagerson and Wade Hansen

To receive further updates on this Adobe (NASDAQ:ADBE) trade as well as an alert when it’s time to take profits, sign up for a risk-free trial of Strategic Trader today.

Stocks dropped again on Wednesday as traders continued to react to negative economic news coming out of China and Europe and as longer-term bond yields continued to drop.

But that’s OK. At Strategic Trader, we have set up our portfolio to be able to take advantage of moments like these.

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Our option-selling strategies can generate income when stocks are rising and when stocks are falling.

This week, we’re looking to generate some short-term income on Adobe (NASDAQ:ADBE).

We took possession of shares of ADBE last week when the ADBE August 9th $302.50 put write we had sold against the stock expired in the money.

When that happened, we not only got to keep the premium we received when we sold the put write, we also got some shares of ADBE that we can sell covered calls against to generate income.

ADBE has been quite volatile the past two weeks, but that volatility is a good thing for us as covered-call sellers because volatile stocks tend to have options with higher premiums.

Daily Chart of Adobe (ADBE) — Chart Source: TradingView

The higher the premium, the more income we make when we sell a covered call.

For this covered call, we set our strike price at the same price we paid for the shares of ADBE when the stock was put to us.

By using this same strike price, we guarantee that we will break even on the stock trade if ADBE suddenly shoots higher and closes above our strike before the calls expire and the stock gets called away from us.

But regardless of whether the call we’re selling expires in the money or out of the money, we’ll get to keep all the profits we make based on the call option’s premium.

Because we expect ADBE to remain below our strike price in the short term, we’ve set our expiration date for this trade out only about two weeks.

If the option expires out of the money at that time, we plan to sell another covered call against our shares as soon as possible to generate even more income.

To find out which ADBE covered calls we’re selling—and to get access to our full portfolio of income-generating trades—sign up for a risk-free trial of Strategic Trader today.

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.

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