# Using options to play Snapchat's quarterly results

But this is passive and there are some interesting things we can do with options. One of my theses around Snapchat was that this earnings call would lead to either a massive decrease or increase and it’s unlikely that Snapchat would be stuck in the middle. If they showed significant progress in Q1 they would discredit the idea that Facebook was beating them and if they failed it would indicate that they will, in fact, lose to Facebook. Options are a great way to implement this idea. The way one can play this is to buy options that are out of the money on both sides - meaning we buy a put option for significantly below the current price and a call option for significantly above the current price. If the stock stays within the range we lose our investment but if it swings too much in either direction and becomes “in the money” we end up profiting. Earlier today I took a look at the Snapchat option chain for options expiring in 2 days, on May 12. Snapchat closed at just under $23 today so if go a few dollars, I chose$4 arbitrarily, and go in either direction to find the appropriate options we get a $19 put and$27 call. While the markets were open each of these cost roughly 30 cents. Then if Snapchat ended up dropping below $19 or increased to be above$27 the options would have some value. And that value is simply the difference between the stock’s current price and the option’s strike price. If Snapchat increased to $29 then the$19 put options would be worthless while the $27 call options would be worth$2 each ($29 -$27) - especially since our options would expire in 2 days so there wouldn’t be a lot of room for movement. Of course we would still have to pay for the options themselves but in this case we would come out ahead - the two options would cost us around 30 cents each but the gross return would be $2 leading to a profit of$1.40. Of course just as easily the options could have expired worthless and we would be out the 60 cents for the two options.