DailyPlay – Opening Trade (SNAP) – October 20, 2023

SNAP Bearish Opening Trade Signal

View SNAP Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 38 Contracts Nov 17th $9/$7 Put Vertical Spreads @ $0.54 Debit per contract.

Total Risk: This trade has a max risk of $2,052 (38 Contracts x $54) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $54 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is neutral to bullish.

1M/6M Trends: Bullish/Neutral

Relative Strength: 8/10

OptionsPlay Score:132

Stop Loss: @ $0.25 Credit. (50% loss of premium paid)

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Thursday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

With earnings season in full swing and technology stocks starting to report next week, one opportunity I see is SNAP which reports next week on Oct 24th. It trades at a ridiculous valuation of 94x forward earnings, which was justified when SNAP was growing exponentially. However, in an environment where growth has slowed meaningfully and SNAP is barely turning a profit, it’s hard to justify these valuations unless SNAP reports a strong surprise with earnings and guidance. With options expensive, I’m looking to take a bearish position using a vertical spread. I’m going to buy the Nov $9/7 Put Vertical @ $0.54 Debit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value to this roll, which is 38 Contracts for a risk of $2,052. We will set a stop loss on the put spread at around 50% of the premium paid @ $0.25 Credit.

SNAP – Daily