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How investors are hedging Adobe

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Investors are apparently buying protection in Adobe ahead of its earnings report on Thursday afternoon.

optionMONSTER's Depth Charge system detected the purchase of about 3,100 September 77 puts bought for $2.05 to $2.29 on Friday. This represents fresh buying, as open interest in the strike was only 654 contracts before the session began.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff. The contracts can be purchased as an outright bearish bet, but Friday's puts are likely hedging long-stock positions given the proximity to the company's quarterly results. (See our Education section)

ADBE rose 0.62 percent to $79.19 on Friday but is down more than 6 percent in the last month. The software maker was trading above $85 before plunging with the rest of the market last month, reaching a low of $71.33 on Aug. 24.

Total option volume in Adobe was just shy of 11,500 on Friday, double its daily average for the last month. Overall puts eclipsed calls by more than 2 to 1.

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