Unusual Options Activity: Snapchat (SNAP)

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  • Shares of social media firm Snapchat (SNAP) peaked in February before trending down. In the past week, they’ve started moving up again. At least one trader sees a push to new all-time highs.

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  • That’s based on the May $62 calls. With shares at $62.01, they’re the at-the-money trade. With 28 days until expiration, over 4,680 contracts traded against a prior open interest of 136, for a 34-fold rise in volume.

    The buyer of the call paid $5.10 to make the trade.

    Snapchat next reports earnings on April 22nd, one week from now. So the trade is likely a bet on a strong earnings beat. In the past, the company has tended to fare well during its earnings reports, offering single-day, double-digit moves higher.

    That’s allowed shares to pop 380 percent in the past year.

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  • Action to take: We like this trade, as well as the lower-cost May $65 calls that also saw unusual options activity. It’s the perfect trade for a company’s earnings, as there will still be plenty of time after earnings to close out the trade.

    Traders with some extra capital at work expecting a blowout earnings quarter should look at making the trade. More speculative traders could look at the May $65 calls. Look to close out after the company reports earnings to take profits off the table.

     

    Disclosure: The author of this article has no positions in the stock mentioned here, buy may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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