SNAP Analysis

Snap Inc. (SNAP)

SNAP is in its ninth day of trading since its initial public offering, with the stock price showing the usual post-IPO instability.

Today is the third day that options have traded. The are quite liquid — no surprise for such a high profile offering — and today implied volatility is at the peak of the symbol’s short history and at a very high level compared to the the benchmark VIX.

I shall use the APR series of options, which trades for the last time 38 days hence, on April 21.

Implied volatility stands at 51%, which is 4.1 times the VIX, a measure of the volatility of the S&P 500 index.

SNAP’s IV stands in the 98th percentile its most recent broad movement.

The price used for analysis was $20.54.

Premium: $2.20 Expire OTM iron fly
SNAP   Odds Delta
Calls
Long 24.00 84.0% 21
Break-even 22.20
Short 20.00 46.4% 60
Puts
Short 20.00 52.9% 40
Break-even 17.80
Long 16.00 90.2% 10

The premium is 55% of the width of the position’s wings.

The risk/reward ratio is 0.8:1.

Decision for My Account

I have entered a direction-neutral position on SNAP as described above. The stock at the time of entry was priced at $20.54.

By Tim Bovee, Portland, Oregon, March 14, 2017

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