Snap Options Traders Load Up on Calls

SNAP options are attractively priced at the moment, too

Managing Editor
Apr 29, 2019 at 11:17 AM
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The shares of Snap Inc (NYSE:SNAP) is up 2.5% to trade at $11.13 today, boosted by news of a partnership with Shopify (SHOP), which can now pay for ads to be rolled out on the Snapchat app. Plus, SNAP call options have been flying off the shelves, perhaps signaling that options traders think the red-hot social media stock has more room to run.

In fact, the equity showed up on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that have attracted the highest options volume during the past 10 days, with names highlighted in yellow new to the list. Per the chart below, 547,822 SNAP calls were exchanged over this two-week time frame, as opposed to 340,410 puts.

MAO April 29

Digging deeper, this trend is nothing new, as data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows SNAP's 50-day call/put volume ratio of 2.33 ranking 3 percentage points from an annual high. In other words, option buyers have picked up Snap calls over puts at a much faster-than-usual pace during the past two months.

Those wanting to speculate on the tech stock's short-term trajectory may want to consider an options-buying strategy. The equity's Schaeffer's Volatility Index (SVI) of 46% ranks in the 7th percentile of its annual range. In other words, volatility expectations appear low, suggesting it's an attractive time to purchase short-term options premium.

Plus, the security's Schaeffer's Volatility Scorecard (SVS) stands at 85 out of a possible 100. This means SNAP has tended to make outsized moves over the last year, compared to what the options market had priced in -- a potential boon to premium buyers.

On the charts, Snap stock has already doubled in 2019. While the shares pulled back last week, they found support at their rising 50-day moving average. A renewed rally could be powered by a short squeeze, too. Short interest fell by 11% in the most recent reporting period, yet still accounts for a healthy 9.6% of the security's total available float. And despite the recent flurry of bullish analyst attention, 21 of 23 brokerages still rate SNAP a "hold" or "strong sell."

MAO Snap


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