James Ramelli Options Play On Adobe Going Into Its Earnings

Adobe Systems Incorporated ADBE is expected to come out with its first-quarter earnings on March 17.

KeeneOnTheMarket.com Trader James Ramelli was on Bloomberg Friday to share his option trade on Adobe going into its earnings report.

The Trade

"I think we are expecting a move higher in Adobe on earnings. Six out of the past eight quarters, it has moved up on earnings, and it moves a lot on earnings day – an average 7 percent," Ramelli said.

"This time around, the options market is targeting just above $81."

He continued, "So, I can look for a call spread out to next week's expiration. The 80 - 82.5 call spread (buying ADBE 80 strike call and selling 82.5 strike call) for about $0.60. I can risk $60 to make $190 if Adobe closes above $82.5, and I am getting a little bit more aggressive because the move that they are implying is actually a little bit cheaper than that 7 percent average. I can better than triple my money if I am right here."

Related Link: Dan Nathan Sees Unusually High Options Activity In Nike

No Man's Land

Ramelli was asked whether he is seeing the market being technically or fundamentally driven right now. He replied, "I think we are really technically driven right now."

He explained, "We are toward the tail end of earnings season [...] and then we get into another full swing of the earnings cycle. So, in between then, we are kind of in a no man's land where we are really just going to be moving on macro data and speculation around the Fed."