Snap Call Options Active After Price-Target Hike

The Snapchat parent is no stranger to bullish options activity

Apr 20, 2018 at 1:50 PM
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The shares of Snapchat parent Snap Inc (NYSE:SNAP) are up 3.4% to trade at $15.34, after Credit Suisse lifted its price target on the stock to $21 -- representing a roughly 37% premium to its current perch, and in territory not charted since a post-earnings bull gap in February. Against this backdrop, and with the shares set to retake their 200-day moving average, SNAP call options are running hot today.

SNAP stock chart

Roughly 51,000 SNAP calls have traded thus far -- three times the usual intraday pace, and more than twice the number of puts exchanged. With standard monthly April options expiring this afternoon, it looks like one trader is honing in on weekly 4/27 calls. Specifically, nearly half of today's call volume transpired at the weekly 4/27 16-strike call, including a sweep of nearly 19,200 contracts.

It's difficult to tell if the calls were bought or sold, but with fewer than 3,400 contracts currently open at the strike, we can assume the options are new initiations. If the trader bought to open the calls, they're expecting SNAP to extend today's uptrend and topple $16 by next Friday's close, when the options expire.

And call buying would echo the growing trend seen in the options pits. Snap's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.08 -- in the 91st percentile of its annual range. This indicates that options buyers have initiated bullish bets over bearish at a faster-than-usual clip during the past two weeks.

However, it should be noted that short interest represents a healthy 14.1% of SNAP's total available float, representing nearly a week's worth of pent-up buying demand, at the equity's average pace of trading. As such, it's possible that some of the recent call buying -- particularly at out-of-the-money strikes -- could be attributable to shorts seeking an options hedge.

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