Call Buyers Pounce as Snap Stock Soars

Snap options bulls are eyeing a key technical level

Jun 12, 2018 at 2:02 PM
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Shares of Snap Inc (NYSE:SNAP) are surging today on a possible halo lift from fellow social media stock Twitter (TWTR). Whatever the reason, SNAP stock is up 4.6% at $13.77, and options traders are targeting even more upside.

At last check, roughly 83,000 calls and 38,000 puts had changed hands on Snap stock -- 1.6 times what's typically seen, and volume pacing in the 90th annual percentile. The June 14 call is most active with 8,857 contracts traded, and it looks like new positions are potentially being purchased here for a volume-weighted average price of $0.19. If this is the case, breakeven for the call buyers at this Friday's close is $14.19 (strike plus premium paid).

Today's accelerated call buying just echoes a growing trend in SNAP's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 2.55 ranks in the 96th annual percentile -- indicating long calls have been initiated relative to puts at a quicker-than-usual clip.

Echoing this is SNAP's Schaeffer's put/call open interest ratio (SOIR) of 0.94, which ranks in the 6th percentile of its 12-month range. In other words, speculators are more call-heavy than usual among options expiring in the next three months.

However, it's likely that some of this activity is the result of short sellers hedging their bearish bets against any upside risk. Short interest surged 17.6% in the most recent two-week reporting period to 108.8 million shares -- representing nearly 18% of Snap's available float.

Regardless of the motive, premium on Snap's short-term options is attractively priced at the moment, from a volatility perspective. This is per the stock's Schaeffer's Volatility Index (SVI) of 46%, which ranks in the 6th percentile of its annual range.

Turning to the charts, SNAP has been flying high since the Snapchat parent bottomed near $10.50 back in May -- boasting a 21% month-to-date gain so far. However, the stock remains well off its Feb. 7 annual high above $21, and today's rally is running out of steam near $14, which is home to its February pre-bull gap and early May pre-bear gap closes.

snap stock daily price chart on june 12

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