Buy Call SNAP

April 25, 2024
Snap (SNAP) Earnings

Today after the close, Snap (SNAP) will report earnings. Headed into the announcement, we are holding a half of a position that got hit hard the last time Snap reported results. How we are going to manage this position is a tough decision.

On the one hand, SNAP stock has stabilized since it got wrecked last quarter, and option activity has perked up. Also, I continue to be surprised by the fact that our August 17 calls are still worth $0.60. Essentially there is a bid to upside calls … though for what reason I’m not quite sure (Maybe the worst has been priced in? TikTok legislation? Takeover?)

On the other hand, SNAP seems to bomb on earnings every single time, and should that happen yet again tonight, there is no way our calls won’t get hit hard. Also, best-in-class peer Meta (META) is lower by 11% today following earnings, which doesn’t bode well for the sector.

I am going to hold my position through the event tonight … though to be perfectly frank, I don’t have high confidence in this decision. But with only half of a position and limited downside to our calls, I am willing to take the “gamble” that expectations are so low for Snap, that maybe, just maybe, the company can exceed those low expectations.

SNAP - With the stock trading at 11, the options market is pricing in a move of $2.50 this week, or 8.50 to the downside and 13.5 to the upside.

Open interest is skewed bullish on a ratio of 2.1:1 call vs. put.

Skew is pricing in extreme downside risk and upside interest.

February 20, 2024

Sell Half of Existing Position: Sell Half of your SNAP August 17 Calls for $0.50 or more.

Snap (SNAP) stock got obliterated on earnings two weeks ago and hasn’t bounced back since. For that reason, it’s time to sell half of our position for a loss and prepare to move that capital into fresher ideas.

To execute this trade you need to:
Sell to Close Half of your SNAP August 17 Calls

This is a disappointing situation as the stock looked great headed into earnings and then totally blew up when results missed expectations. Such are the rough risks of earnings season. Grrr!

Of note, we will give the final half of this position a bit more time … though my patience is running out.

December 20, 2023
Buy the Snap (SNAP) August 17 Calls (exp. 8/16/2024) for $3.85 or less.

Snap (SNAP) has been on my radar for the past two weeks as the stock has broken out in a big way, Wall Street has upgraded the stock many times this week, and option activity has been very strong. First here are the bullish options trades from last week, followed by some of the upgrades:

Thursday - Buyer of 10,000 Snap (SNAP) February 18 Calls for $1.41 – Stock at 17 (rolled from February 15 calls)

Monday - Buyer of 5,000 Snap (SNAP) April 15 Calls for $2.68 – Stock at 15.8

Today, Citigroup – Price target raised $7

Tuesday, Loop Capital – Price target to 21, up from 15

Tuesday, Raymond James – Resumed with Outperform rating

Monday, Guggenheim – Price target to 23, up from 9

And while there are risks in chasing SNAP after a big stock run, I like this set-up a lot and am going to add the stock to the portfolio today.

To execute this trade you need to:
Buy to Open the SNAP August 17 Calls

The most you can lose on this trade is $385 per call purchased.

The risks I see in this trade are the following:

We aren’t early to SNAP as the stock has been on a monster run.

Potentially the reason for the strong stock performance is the market is now pricing in aggressive interest rate cuts next year … and if the Fed talks down those expectations, stocks like SNAP could fall very quickly.

That being said, the price of these calls is pretty inexpensive, and should a stock like SNAP really get in gear in 2024, this trade has the potential to be a home run.