Social media company Snap Inc (SNAP) has seen shares drop 70 percent in the past year. One trader is betting that shares have further to fall in the next six months.
That’s based on the September $6 puts. With 176 days until expiration, 11,418 contracts traded compared to a prior open interest of 246, for a 46-fold rise in volume on the trade. The buyer of the puts paid $0.27 to make the bearish bet.
Shares recently went for about $11.50, so they’d need to drop nearly in half for the put option to move in-the-money. And shares would need to see a new 52-week low, moving past the prior low of $7.33 per share.
Such a move looks possible in the coming months. Snap has seen revenue growth of a scant 0.1 percent over the past year. And the company lost over $1.4 billion last year in total, which continues to eat away at Snap’s balance sheet.
Action to take: Investors who expect the economy to get better in the near future could fare well with Snap shares. But given their move off the low and the current economic climate, it’s better to sell shares or go short here.
For traders, and those who want to go short, the September puts have ample time to play out. While the options may not move in-the-money, their low price could allow them to see high double-digit gains or better in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.