About five weeks ago I picked up SNAP for a short term trade. I wrote about it here . I made a few mistakes with this trade.
- I had bought the stock at $17 per share and had watched it run up to almost $18 – choosing not to sell at this point. Greed can at times mess up short term positions. At that time I didn’t realize a key event that was on the horizon for SNAP.
- The key event that was on the horizon was insiders would be able to sell their shares starting from July month end. When a company goes trough IPO – it is normal practice to put restrictions on existing shareholders from selling their shares. They usually can not sell their shares on the public market until a specific time period has elapsed. This is to prevent over flooding the market with shares . A large amount of shares came onto the market at the end of July and another large amount is expected on Aug. 15. If I was aware of this vesting – I probably wouldn’t have picked SNAP for a short term trading candidate. My mistake on not doing enough research even on a short term trade !
- Another item I was aware of but didn’t give enough attention to was how much more popular Instagram live video is vs SNAP. Many time when I am trading companies whose products I use – I give some weight to how much I like the product or how much the people I know like it. Example of this is my investment in Lululemon. Before buying SNAP I did an informal survey of my friends and family in the age range of 16 to 30 and most of them appeared to be using SNAP daily. The question I didn’t ask at that time but asked latter was if they can choose between SNAP and Instagram which one would they pick . Every single person choose Instagram over SNAP.
- I also didn’t walk away with a loss – when my $17 position suddenly dropped to a $15.47 position. That would have left me with a 10% loss on my position. Which is not bad given I have been recently making 10 o 15% gains in other positions. As most people I have always struggled with walking away with a loss – this is something you have to be comfortable with if you choose to do short term trading !
- I still own SNAP shares – today it has been trading in the range of $13.24 o $14.06. I am holding SNAP because I believe they have a fighting chance in the social media company space ( even though they call themselves a camera company ) .
- They have two major upcoming events that they need to get over without too much loss – Earnings report on Aug . 10th and additional stocks becoming available for sale on August 15th. I think if they are able to get through these two events – they have upside potential.
- Just to help me sleep better and to reduce the amount of cringing I have to do when I look at my portfolio – I bought SNAP put options that expire on Aug. 18th with a strike price of $13. This should protect me against any sudden and large drop in the price of SNAP.