Unusual Options Activity: Snapchat (SNAP)

Snapchat (SNAP)

Trader bets on double by January 2022

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  • January 2022 call options on Snapchat (SNAP) saw over 17,621 contracts trade, and 18-fold rise over the prior interest near 1,000.

    The contracts, expiring in 709 days, are a bet on the company roughly doubling from their current price near $17.60.

    The option buyer also paid $1.50 per contract, so shares would need to clear $36.50 at expiration to profit. That would bring the return expectation up to 107 percent over today’s share price.

    A doubling would also bring the company’s market cap to around $50 billion. Shares are up 95 percent in the past year, roughly four times higher than the S&P 500 Index.

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  • Action to take: The social media platform is well on its way toward a profit, thanks to a 44 percent rise in revenue in the past year and better-than-expected subscriber numbers. A share-doubling rally in the next two years is easily possible.

    We like this leap trade, given how inexpensive it is. The trade has the potential to double or triple… if not better if the company explodes even higher in the next few years. Compared to prior bullish options trades on unusual volume, this one is far out, but has a lot of time to play out.

    If events don’t work out, the option isn’t too expensive either, minimizing the loss compared to buying shares.

    For investors, we like shares up to $18 right now, well off their 52-week high of $19.75. We don’t expect last year’s massive gains right away, but shares could still outperform the stock market this year.

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