Snowflake Option Trader Dumps $1M In Call Contracts

Snowflake Inc SNOW shares gained another 14.2% on Friday and are now up 31% in two days after the company reported 119% revenue growth in its first earnings report as a public company.

Snowflake’s business is clearly on the right track, but its stock has now more than tripled from its IPO price of $120 in less than three months.

The Snowflake Trades: On Friday, Benzinga Pro subscribers received several option alerts related to unusually large Snowflake trades. Here are some of the largest:

• At 11:41 a.m., a trader sold 214 Snowflake call options with a $385 strike price expiring on Dec. 11 near the bid price at $25.601. The trade represented a $547,861 bearish bet.
• Seconds later, a trader sold 202 Snowflake call options with a $385 strike price expiring on Dec. 11 near the bid price at $25.20. The trade represented a $509,040 bearish bet.
• At 11:46 a.m., a trader bought 275 Snowflake call options with a $395 strike price expiring on Dec. 11 near the ask price at $21. The trade represented a $577,500 bullish bet.
• At 11:57 a.m., a trader sold 1,300 Snowflake call options with a $400 strike price expiring on Friday at the bid price of $3. The trade represented a $390,000 bearish bet.

Related Link: 3 Snowflake Analysts On Cloud Data Stock's Potential: 'Unique Technology Advantage'

Why It’s Important For Snowflake Investors: Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge.

In this case, given the relatively large size of the largest trades on Friday, they could certainly be an institutional hedge.

Blowout Earnings: High-profile Snowflake IPO investors salesforce.com, inc. CRM and Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) were vindicated Wednesday when Snowflake reported $159.6 million in revenue for the third quarter and an EPS loss of $1.01, down from a per-share loss of $1.92 a year ago.

Snowflake also guided for between $162 million and $167 million in product revenue in the fourth quarter representing between 97% and 103% year-over-year growth.

Company management also said the company can expand its margins to the mid-70% range over time as it scales.

Following the report, Piper Sandler analyst Brent Bracelin reiterated his Outperform rating for Snowflake and raised his price target from $264 to $312.

"We remain bullish on SNOW based on a promising 5-8 year growth trajectory and would opportunistically add to positions on weakness," Bracelin said.

Benzinga’s Take: The two trades that happened within a few seconds of each other were almost certainly the same trader and represented a combined Dec. 11 call sale worth about $1.05 million. The call seller may be anticipating a pullback in Snowflake shares next week following the huge two-day rally, but it’s also likely the trader is simply taking profits in this week’s big move.