Unusual Options Activity: Snapchat (SNAP)

Buyers bullish ahead of earnings.

The October 11th $18.50 call options on Snapchat (SNAP) saw over 18,400 contracts trade against a prior open interest of 500, a 31-fold surge in volume. Traders are betting that shares, around $17.50, can rally another $1, or 5 percent, higher in the next 16 days.

That’s a reasonable bet, as shares have more than tripled off their 52-week lows of $4.82, and shares have traded as high as $18.36 in the past year.

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  • Snapchat shares struggled just one year ago, but in that time, the company has managed to beat earnings expectations in each of the last four quarters, and has proven a popular stock to trade options both up and down. The company next reports on October 23rd, and may even post its first profit.

    Action to take: Shares look expensive following their rally this year. Investors should target a price of $15 to get shares on one of their periodic pullbacks.

    Speculators should look for a call option with a strike date past the company’s next earnings, to take advantage of any earnings surprises. The January 2020 $20 calls are a bit more expensive than the October $18.50 calls, but they give traders more time for the trade to play out and rally into the end of the year, and could still offer a double if shares continue their recent trajectory.