Snap Attracts Option Bears as Stock Swoons With Facebook

SNAP stock is trading back below its IPO price

Mar 20, 2018 at 2:05 PM
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It's been a rough few weeks for the shares of Snapchat parent Snap Inc (NYSE:SNAP). On Feb. 22 -- just a couple weeks after SNAP gapped to an eight-month high after earnings -- the stock tumbled after reality TV star Kylie Jenner reacted to the mobile app's controversial new layout. Then, late last week, SNAP stock was smacked again after Rihanna responded to a controversial ad, encouraging fans to delete Snapchat. Now, SNAP stock is headed for its fourth straight loss, as social media stocks sink amid reports of a Federal Trade Commission (FTC) investigation into Facebook's data controversy. What's more, some options traders are expecting for more downside for Snap stock this week.

SNAP has seen roughly 29,000 puts change hands so far today -- slightly more than usual. Most popular is the weekly 3/23 15.50-strike put, which has seen nearly 5,100 contracts exchanged. It looks like a healthy portion of the puts are being bought to open. If so, the speculators expect the Snapchat parent to extend its retreat and breach $15.50 by Friday's close, when the weekly options expire.

Short-term options traders are already much more put-heavy than usual right now. Snap's Schaeffer's put/call open interest ratio (SOIR) of 1.39 is higher than 75% of all other readings during the past year. This indicates that SNAP's near-term puts outnumber calls by a much wider-than-usual margin.

At last check, SNAP stock has dropped 4.2% to trade at $15.73. The shares have surrendered 9.2% so far in March, and are tracking for their worst month since November 2017. Further, SNAP is now south of the key $17 area -- its initial public offering (IPO) price, and a level that has acted as both support and resistance in the past year.

SNAP stock chart

 

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