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Social-media company Snap has been trying to rebound from a summer selloff, and options traders may expect further gains.
Heavy volume was detected yesterday in the 6-December 12.50 calls, with early blocks fetching for $0.24 to $0.30. Premiums more than doubled to $0.79 as the activity grew. More than 23,000 contracts changed hands by the end of the session, exceeding previous open interest of 14,617.
Calls fix the price where a security can be purchased. They can appreciate rapidly when values increase, but become worthless if shares don’t reach a certain level by expiration.
Tuesday’s activity was especially noteworthy because traders used the short-term weekly calls expiring this Friday.
Snap (SNAP), daily chart, with select patterns and indicators.
SNAP rose 6.2 percent to $12.86 yesterday. It was the highest closing price since July 31, shortly before the stock gapped lower on weak revenue. It rebounded after its next quarterly report in October before pulling back to its 50-day moving average.
The shares then stabilized and advanced for the last nine sessions. Some of the bounce came after November 29, when Citi raised its price target from $11 to $13. The analyst cited the potential for margin expansion as users spend more time on the app.
Overall option volume in the company was more than twice the daily average on Tuesday, according to TradeStation data. Calls accounted for a bullish three-quarters of the total.
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