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We have been managing a position in Adobe (NASDAQ:ADBE) since mid-September. We started by selling naked puts and took possession of the shares when the market dropped in October. Since then, we have sold covered calls against the stock to earn additional premium.

We have another opportunity to sell options against ADBE this week. We expect the current channel to hold, and that makes selling calls is a good way to generate income while we wait for ADBE’s next earnings report in December.

If we look at the chart below, we see that ADBE dropped below the $235 level, which was previously acting as support. This old support level should act as resistance in the short term and put a lid on ADBE’s rally.

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

Overall, we are optimistic that ADBE has been oversold like its peer, Microsoft (NASDAQ:MSFT).

Furthermore, the latest capital investment report from the U.S. Bureau of Economic Analysis hit a new record, which included even more spending on software, hardware and cloud resources… We don’t believe that growth has been priced into the stock yet.

However, trade disputes are still an issue for the market and this stock, so we plan to continue selling option premium while we wait to see how the situation resolves.

To find out which covered calls we’re selling and see exactly how we are trading this situation — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to 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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