Analysts flag unusual buying in Adobe upside calls

By Doris Frankel and Jim Finkle

CHICAGO/BOSTON (Reuters) - Investors flocked to upside calls in software maker Adobe Systems Inc (ADBE.O: Quote, Profile, Research) on Tuesday, betting on a turnaround in the underlying stock on anticipated product news, a positive earnings surprise or a possible sale of the company.

Adobe could not be immediately reached for comment.

Volume in Adobe calls surged as its shares rose 23 cents to $34.90 in late trade after posting a session high of $35.53.

In all, roughly 41,000 calls compared to 2,439 puts changed hands in Adobe near the close, three times its normal volume, according to option analytics firm Trade Alert.

Adobe shares have fallen 19 percent since January as money has shifted out of technology stocks on worries that the economic slowdown will cause businesses to cut spending on computers and software.

A variety of factors could cause investors to rethink the thesis that an economic slowdown means that Adobe is in for a rough ride this year.

Many Wall Street analysts have been painting a pessimistic picture, saying the company is near the end of a surge in sales that came from last year's release of a major upgrade to its family of graphics design software, which is known as CS3 and includes popular titles such as Illustrator and Photoshop.

"Clearly the fast money is all over Adobe right now," said Jon Najarian, co-founder of Web information site optionmonster.com in Chicago. "For two sessions in a row including today, we have seen very strong buying of Adobe out-of-the-money calls."