Trade Alert: Betting Against A Social Media Company

One Last Earnings Trade For Today.

Apr 27, 2023

Note: since SNAP just released earnings, I’ve unlocked this post for free subscribers. SNAP is trading below $8.50 after hours now. Assuming SNAP stays below $9.50 tomorrow, as seems likely, we will collect the maximum gain on this trade.

Betting Against Snap

Snap, Inc. ( SNAP 0.00%↑ ), the company formerly known as Snapchat, is releasing earnings after the close today.

SNAP is weak fundamentally and technically, according to Chartmill’s summary data,

But I bet against it here based on LikeFolio data. Recall we talked about LikeFolio’s social data in a previous post today:

Trade Alert: Betting Against An Electric Car Co.

Portfolio Armor

April 27, 2023

Trade Alert: Betting Against An Electric Car Co.

Time Versus Time Decay Before I get to today’s trade, a note about what I’m trying to balance in general with options trades going forward. Namely, Allowing more time for fundamentals to play out. We got Bed Bath & Beyond ( ) right directionally earlier this year, and even

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For SNAP, I opened a put spread expiring tomorrow (April 28th) buying the $10 strike put and selling the $9.50 strike put for a net debit of $0.22. The max gain on 10 contracts is $280, the max loss is $220, and the break even is with SNAP trading below $9.78.

In this case, I’ve used a spread expiring after today’s earnings because the options market is pricing in a significant movement either way after these earnings, and SNAP has a history of big post-earnings movements.