SNAP Analysis

Snap Inc. (SNAP)

Update 8/14/2017: SNAP’s results came in at a loss of $0.16 per share, lower than the $0.14% loss in the analysts’ consensus forecast. Shares immediately declined by about $2, traded as high $2.20, declined a again to its $2 loss and then on the second day rose to close to pre-earnings levels. I exited with shares at $12.

Shares showed a net declined of 11.2% over my four-day holding period, or a -1,026% annual rate. Tye options position produced a 2.4% loss on debit for a -223% annual rate. 

Zacks Investment Research forecast a downside earnings surprise a 29% score, which in terms of direction and the market response is in line with what actually happened.

Had I exited on the first session after earnings were published, I would have paid a $3.62 debit. By waiting, I reduced the debit to $2.05, mitigating the loss. In this case, waiting proved to be the correct strategy.


SNAP publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Aug. 18.

Implied volatility stands at 94%, which is 6.4 times the VIX, a measure of the volatility of the S&P 500 index.

SNAP’s IV stands in the 97th percentile of both its range since trading began last March and its most recent broad movement.

The price used for analysis was $13.54.

Premium: $2.00 Expire OTM  
SNAP-iron fly Strike Odds Delta
Long 18.00 90.9% 14
Break-even 16.00 ~80.8% ~26
Short 14.00 69.6% 48
Puts
Short 14.00 39.3% 52
Break-even 12.00 ~67.0% ~26
Long 10.00 87.7% 8

The premium is 50% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered an order on SNAP as described above. The stock at the time of entry was priced at $13.52.

By Tim Bovee, Portland, Oregon, Aug. 10, 2017

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

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