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We own shares of Adobe (NASDAQ:ADBE) in our Strategic Trader portfolio, and we are now interested in selling a covered call against that stock position for two reasons.

First, ADBE has created a strong resistance level in the short term at $260. As you look at the chart of the stock, you can see not only a horizontal level that has served as resistance in mid-June, mid-July and most recently in mid-October (it also served as support in September), but also an up-trending level that served as support in late June, late July and mid-August.

The confluence of both of these levels is likely to hold as resistance in the near term.

Second, ADBE doesn’t have an earnings announcement scheduled until mid-December, which means we are less likely to see any large shocks to the stock price.

We wouldn’t be surprised to see ADBE drift a bit higher while it consolidates, but we don’t anticipate seeing it rise above $260 before expiration, which should give investors the opportunity to sell another covered call against the stock next month.

For those of you who own 100 shares of ADBE or more, our recommendation is as follows:

‘Sell to open’ the ADBE November 16th $260 Covered Call (ADBE181116C00260000) for a minimum price of $3.80.

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