$SNAP put buyers quadruple their money


Bearish option traders are benefiting big time from Snap’s losses.

Back on May 9, Investitute’s proprietary programs cited the purchase of 5,600 August $21 puts for $1.90 to $2 with shares at $22.70. This was clearly new positioning, as open interest in the strike was only 17 contracts before the activity appeared.

Those puts traded up to $9.10 this morning, an average gain of more than 365 percent. The stock plunged 47.6 percent in the same period, a huge move but still far less than that of the options.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

SNAP dropped 13.59 percent to $11.83 today. The social-media company announced a wider loss than forecast while falling short of revenue estimates in its quarterly report after yesterday’s close.

Learn more about Unusual Option Activity and start your own free trial!

Start your free trial

Mike Yamamoto | Investitute

Learn more about Unusual Option Activity and join the conversation!