ADBE - Vol Explodes on Takeover Rumors with MSFT Right Now

Discussion in 'Options' started by livevol_ophir, Oct 7, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    ADBE is up 8.0% with IV30™ up a huge 74.4%. The <a href="">LIVEVOL™ Pro Summary</a> is below.

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    Rumors abound of a deal with MSFT. Let's look to the Skew Tab (<a href="">in the article</a>)

    <img src="" width="600">

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    We can see a tremendous upside skew, totally reverse of "normal skew." The upside is super bid, back months haven't reacted yet.

    Looking to the Options Tab (<a href="">in the article</a>), we can see the Oct 34 calls are $0.20 bid priced at 106 vol. HV10™ is 21.33. Nice... Keep in mind ADBE is actually at discount right now given their collapse after the earnings release on 9-21-2010 AMC.

    The stock went from $32.94 to $26.67 in a day. It's reasonable to assume a takeover price would at a substantial premium to even the 34 strike. Happy spec to anyone who wants to trade this one.

    One note - it may be possible to do an Oct/Nov 34 call spread for nearly even (sell Oct/buy Nov). If done for even, that's an arb.

    This is trade analysis, not a recommendation.

    Details, trades, prices, vols, skews here:

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