DailyPlay – Opening Trade (ADI) – November 19, 2024

ADI Bearish Opening Trade Signal

Investment Rationale

Analog Devices, Inc. (ADI) recently broke down from its trading range with strong momentum and is underperforming the S&P 500, signaling potential downside to our $200 target.

From a fundamental perspective, ADI appears overvalued relative to its peers. Despite trading at a 38% premium, its net margins (17.07%) trail the industry average (19.87%), and revenue growth (13.67%) offers limited upside as earnings continue to decline.

The company is expected to announce earnings before the market opens on Tuesday, November 26, which will be factored into our option strategy.

ADI – Daily

Trade Details

Strategy Details

Strategy: Long Put Diagonal Spread

Direction: Bearish Put Diagonal Spread

Details: Buy to Open 6 ADI Nov 22/Nov 29 $202.50/$207.50 Put Diagonal Spreads @ $3.37 Debit per Contract.

Total Risk: This trade has a max risk of $2,022 (6 Contract x $337) based on a hypothetical $100,000 portfolio normally risking 2%. We suggest using 2% of your portfolio value and divide it by $337 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that is expected to continue its bearish trajectory over the course of this trade.

1M/6M Trends: Bearish/Bearish

Relative Strength: 3/10

OptionsPlay Score: 170

Stop Loss: @ $1.69 (50% loss of premium paid)

View ADI Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

PLEASE NOTE that these prices are based on Monday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View ADI Trade