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ADBE: A Very High Probability Earnings Trade
- Strats Team
- Sep 11
- 5 min read
This brief explores a new trading opportunity in the stock of Adobe Inc., which is set to announce its earnings on September 11, 2025. This is an advanced earnings strategy that has an almost 100% probability of profit, irrespective of the implied move in the stock after earnings. This brief serves as a valuable resource for improving your knowledge in trading earnings, akin to a professional options trader. Let us look at what makes this so unique, different scenarios, cases of what might happen, and how to respond, along with payoff profile analysis.
Date: September 10, 2025
Asset: Adobe Inc ($ADBE)
Distribution: Pre-Market
Last Traded Price: $350.16
Recommendation: Neutral to Slightly Bullish
Strategy: Call Ratio Spread
Moneyness: Out-of-the-money (OTM)
Investment Horizon: 1 Day
Exit Strategy: Let it expire or close on demand for profit as per the plan below
Summary
Adobe Inc. (ADBE), with a $151.3 billion market cap, is one of the world’s largest software firms. It operates in three segments: Digital Media, Digital Experience, and Publishing and Advertising, providing solutions for creating, managing, and optimizing digital content. Its key products, including Creative Cloud and Document Cloud, generate most revenue through subscriptions and licenses, serving creative professionals, businesses, and consumers globally.
The stock price declined about 40% from its 52-week high of $587.75, with a 13.7% drop over the past three months, lagging behind the Nasdaq Composite’s ($NASX) 11.9% rise over the same time frame.
That's quite a divergence right there, and evidently lagging behind the market. Good company, but poor performance lately. It's set to announce earnings today (Sep 11) after market close, with revenue expectations of 9.2% YoY growth to $5.9 bn & EPS of $5.18.
With that said, let's look at the chart, volatility analysis, and payoff profiles for the trade idea, which we think is an excellent one.
Chart
To illustrate better, here is the implied move of the stock post earnings shown in a linear box, which the options market expects.
Volatility Analysis
Looking at the volatility surface, it is clear that the IV is high for the near-term expirations. Vol surfaces are generated atleast 7 days out to get the IV, hence don't have Sep 12 expiration, but one could expect the IV makes an even higher peak due to earnings volatility.
How to read this?
Vol surfaces give us a three-dimensional view of how the volatility changes with respect to other variables, such as strike prices and expirations. This is crucial to identify valleys (lowest IV) and peaks (highest IV).
We call the valley "Global Minima," -> which is the lowest point in the surface. Think of dropping a ball onto the surface, and the ball naturally settles down at the lowest point provided that it isn't stuck in another valley adjacent to it, but at a fairly higher point. This is called "Local Minima". Put simply, Global Minima is the lowest valley, and Local Minima is 2nd lowest valley or similar. The same applies to maximum IV areas, although our focus is to identify "Global Maxima", which is the highest IV point (peak). We analyze these to decide whether to use credit (sell) or debit (buy) options strategies.
A rule of thumb is:
Sell high IV when you expect it to drop
Buy low IV when you expect it to rise
It is clearly evident that strikes around 420 / 425 carry more IV, thereby yielding us more premium to sell those options with more juice (premium) to collect as a seller.
As of this writing, market closing prices on Sep 10 show ADBE has an implied move of ±38.5 with an implied volatility of 185% for Sep 12, 2025, expiration.
It means, after the earnings announcement, the options market expects the stock to swing atleast 38.5 points up or down with about 68% confidence (1 standard deviation) from the current level.
Trade Construction
Call Ratio Spread
BTO 1x ADBE Sep12 420 Call STO 2x ADBE Sep12 425 Call
Credit Received to open the position = $155.50 (as per mid price at closing)
Margin Required by broker = $4,250
Time left = 1 day
Probability of Profit = 100% (our calc. only, rounded off 96%; with active adjustment)
Payoff Profile
As shown by the graph, we receive a small credit to open the position, which is about 4% of the margin required by the broker.
Maximum profit occurs when the stock ends up exactly at the short strike of 425 on Friday evening. As we've seen, the implied move is just ±38.5 from the current level of 350.16, meaning that 350.16 + 38.5 = 388.66, which is still well below the strikes.
In reality, even if the stock moves higher than the implied move, which happens often, it has to move to the 400 level, which is about a 14% implied move. This can happen, but it is rare.
Let us look at case scenarios and how we can manage the position.
Best Case
Stock ends up at short strike, and we get to keep the max profit of $655.50, but the stock moves slowly the next day, and it's still a good idea to close in profit if it moves to 425. Volatility crush next day helps you as well.
Worst Case
Earnings were surprisingly good, and the stock started to move well beyond the 400 level. At that point, we will still have profit because of the volatility crush (implied volatility drop) the next day after earnings, and one has to quickly close the position if the stock appears to move beyond the short strike of 425, which is rare. Please note that theoretically, the max loss is infinite due to exposed upside.
Normal Case
You do nothing and let the options expire if the earnings were poor or normal, and the stock hasn't made much of a move.
Here's the expected profit the next day after the market opens, when the volatility drops due to IV crush, and how you can be profitable even when the stock moves into the strikes. Times shown are in CET Germany; please subtract 6 hours to arrive at US ET, New York.
Even at one hour after the market opens, the next day after the earnings on September 12, if the stock moves to $422, we see a profit of about $254.30 on an IV drop to 60%, which is a realistic estimate, with 5 hours remaining to expiration.
Conclusion
As always, we will share live updates as and when we make adjustments to the position. This trade requires an upfront margin of approximately $ 4,000 to cover adverse scenarios. If we fail to adjust the position and the stock continues to move into the loss area of the profile, which is rare, it serves as a protection measure by the broker. This is a very high probability trade perspective, and we hope you enjoy learning this strategy for earnings.
Thank you for taking the time to read this brief. If you have any questions, please post them in the comments section, and one of our analysts will respond promptly.
Disclaimer: This trading brief is for educational purposes only and does not constitute financial advice. Options trading involves significant risks, including the potential loss of the entire investment. Investors should consult a financial advisor and conduct their due diligence before executing any trades. Please read the risk disclosure at OCC to understand the risk considerations required to trade options.
Notes on Assumptions: Premiums are based on direct market access tools available at our desks; actual order fills for you as a trader may vary depending upon the time of execution, broker data feed, market access, etc., among many other factors. Charts and technicals exclude fees.
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