SNAP Unusual Option Activity Trade Becomes 6-Bagger

Less than a month ago, we alerted Unusual Option Activity Pro members to this bearish trade made in SNAP.

This trader spent more than $1.5 million buying out-of-the-money put options in Snapchat, expiring in June. Those options were bought well-above the open interest, and were worth between $2.62-$2.63 at the time.

That wasn’t the only trade this bear made in $SNAP options — they also sold 1,283 May 20th $31 strike call options worth $1.71 each. Those calls expired worthless, meaning this trader could have booked a max profit of $219,393 on that premium collection trade. 

But that quarter-million was nothing compared to the massive windfall of profit that was on its way for this option trader. 

Snapchat Plunges More Than 40%

Ouch. Source: Google News.

On Monday night, Snapchat dropped a bombshell: There’s a big earnings miss on the horizon. In an SEC filing, the social media company said, 

“The macroeconomic environment has deteriorated further and faster than anticipated.”

The company dropped more than 40% on the news, and currently trades at $13.10 — far below its IPO price. 

Bad news for bulls, but great news for the bearish trader from the Unusual Option Activity report above. Those put options, initially bought for $2.62-$2.63, are now trading at a mid price of $17.90. That means that the $1.5 million dollars UOA trade above is now worth $10,335,460. 

The Bottom Line

As with all unusual option activity, we don’t know whether this trader was using inside information, or just had a really great hunch. What we do know is that whether the market is bearish or bullish, unusual option activity should not be ignored. 

Curious what the “smart money” is loading up on next? Check out Unusual Option Activity Essential for weekly trade ideas from a Chartered Market Technician based on technical analysis and “smart money” moves. Click here to try UOA Essential for $29.