Note: SNAP just released earnings and is trading below $8.70 after hours now. Assuming SNAP stays below $9.50 tomorrow, as seems likely, we will collect the maximum gain on this trade.
Betting Against Snap
Snap, Inc. ( SNAP -17.11%↓ ), the company formerly known as Snapchat, is releasing earnings after the close today.
SNAP is weak fundamentally and technically, according to Chartmill’s summary data,
But I bet against it here based on LikeFolio data. Recall we talked about LikeFolio’s social data in a previous post today:
Trade Alert: Betting Against An Electric Car Co.
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1:06 PM
Time Versus Time Decay Before I get to today’s trade, a note about what I’m trying to balance in general with options trades going forward. Namely, Allowing more time for fundamentals to play out. We got Bed Bath & Beyond ( ) right directionally earlier this year, and even
For SNAP, I opened a put spread expiring tomorrow (April 28th) buying the $10 strike put and selling the $9.50 strike put for a net debit of $0.22. The max gain on 10 contracts is $280, the max loss is $220, and the break even is with SNAP trading below $9.78.
In this case, I’ve used a spread expiring after today’s earnings because the options market is pricing in a significant movement either way after these earnings, and SNAP has a history of big post-earnings movements.
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