Upside option positions opened in Snap this morning turned exponential gains by the afternoon.
Less than an hour before noon ET, Investitute’s market scanners identified the purchase of 27,000 September $15.50 calls for $0.15 to $0.25 with shares at $15.09. These were clearly new positions, as volume was well above the strike’s open interest of 4,321 contracts.
Those calls traded for $0.56 less than three hours later, nearly tripling in value. The stock was up less than 2.8 percent at the same time, showing how quickly options can far outpace gains in their underlying shares. Snap began rallying sharply after Investitute co-founder Pete Najarian cited the unusual option activity on CNBC’s “Halftime Report” today.
Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.
SNAP reached a high of $15.57 today but pulled back at the end of the session to close down 0.46 percent at $15.27. The social-media stock has been beaten down but continues to see heavy upside option activity, including more than 30,000 September $16 calls bought on Friday.