The article details two options strategies for Snap Inc. (SNAP) based on its current $7.16 share price. Selling the $7.00 strike put, with a $1.53 bid, offers an effective share cost basis of $5.47 and a potential 21.27% annualized return if the 67% chance of expiring worthless materializes. Alternatively, a covered call strategy using the $10.00 strike call, with a $1.15 bid, could yield a 55.73% total return if assigned by September 2026, or a 15.63% annualized premium if the 51% chance of expiring worthless occurs, providing investors with income or discounted entry points while managing volatility.
The article outlines two long-dated options strategies for Snap Inc. (SNAP), leveraging its elevated implied volatility to either acquire shares at a discount or generate income. For investors seeking to enter a position, selling the September 2026 $7.00 strike put contract at a $1.53 premium provides an effective cost basis of $5.47 per share, a substantial discount from the current price of $7.16. This strategy carries a 67% probability of the option expiring worthless, which would result in a 21.27% annualized return on the cash commitment. For existing shareholders, a covered call strategy involving selling the September 2026 $10.00 strike call for a $1.15 premium could generate a total return of 55.73% if the stock is called away. Alternatively, if the stock remains below $10.00, which has a 51% probability, the investor would collect the premium for a 15.63% annualized yield boost. The analysis is underpinned by the significant spread between SNAP's implied volatility (66%-72%) and its trailing twelve-month actual volatility (59%), indicating that option premiums are currently rich, reflecting market expectations of future price swings.
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