Option Bears Keep Pounding Snap Stock

Snap Inc (NYSE:SNAP) options traders are buying to open puts as negative analyst attention sends the stock lower

Mar 16, 2017 at 11:22 AM
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Market newcomer and Snapchat parent Snap Inc (NYSE:SNAP) is slipping on the charts again today, off 2.9% at $20.17, as traders digest yet another bearish note from the brokerage bunch. Specifically, MoffettNathanson initiated coverage on the stock with a "sell" rating and $15 price target. In its two weeks of public trading, SNAP shares accumulated a following of eight analysts, not one of which say to buy the stock. Meanwhile, options traders continue to take a pessimistic approach to the stock, as well.

At present, put open interest on SNAP more than doubles call open interest, with over 137,500 contracts outstanding. The top open interest position by far is the April 18 put, where 31,426 contracts reside. On March 10 -- the stock's first day of options trading -- a fair number of positions were sold to open at this strike, while SNAP stock was trading above $22. Since then, however, it looks like most of the action on this put has occurred on the buy-to-open side, with bearish traders betting on a slide to lower lows before the back-month expiration, at the close on Friday, April 21.

Today SNAP calls are trading at a slightly faster-than-expected pace, with about 9,500 contracts changing hands, well below the 16,000 puts traded. That doesn't mean speculators are becoming more bullish, though. Among the most active calls so far are the April and July 21 strikes, where it appears traders are likely selling to open new positions, betting the strike will serve as a ceiling in coming months. The most active option overall, meanwhile, is the October 16 put, where it seems bearish traders are purchasing new positions.

Outside of the options pits, short sellers continue to target Snap Inc (NYSE:SNAP), with these bearish bets accounting for roughly half of the stock's trading volume over the past week according to ShortVolume.com. But all this pessimism is unsurprising, as SNAP has been quite a disappointment since its high-profile IPO. The shares have so far given back 17.6% from their March 2 close at $24.48, and came within one penny of a fresh record low earlier.

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