Adobe Systems, Inc. (Update)

January 34 Call Option Price: $2.50

Yesterday we sold two Adobe 34 calls for $250 each. If exercised, our effective sale price of the 200 shares will be $36.50 per share (we would also sell our remaining 30 shares at this time and completely close our position), for a gain of roughly 110% on our purchase price, and a PE ratio of about 22x next year's estimated earnings. If Adobe shares remain below $34 by the third Friday of January, we will keep the $500 of premium and consider selling additional calls depending on the stock's price. We think that Adobe is an excellent company with a bright future, and initially planned (and hoped) to hold our position for a much longer time period as earnings grew and multiples slowly expanded. But the market had different ideas, and Adobe's tremendous run up has pushed Adobe's earnings multiple to lofty levels which we are uncomfortable with.

Nike Inc.

October 50 Put Option Price: $2.3

Yesterday we sold two Nike October 50 puts for $230 each. We feel that an effective purchase price of $47.7 per share of Nike would present a compelling opportunity to allocate about 8% of our capital to investing in one of the more iconic companies and powerful brands of our generation at a favorable valuation. We'd be thrilled to include Nike as one of our "core" holdings. In the event the puts are exercised, we will post a thorough analysis of this investment and the reasons for our expected return. Nevertheless, if Nike stock is above $50 at expiration and the puts are not exercised, we will receive a roughly 4.85% real return or roughly 19% IRR on our $10,000 in reserved cash.