Snap shares got crushed this week – falling nearly 15 percent as investors question the company's growth prospects.
The options market is implying some big moves for the stock as a key event nears.
Recent analysts' downgrades, a nearing lock-up expiration date and a rising short interest have created a cloud of negative sentiment around the social media company.
"This week we had some underwriters, JPMorgan lowered some numbers, and a few other investment banks are kind of talking down the story a little bit," Dan Nathan of RiskReversal.com said Thursday on CNBC's "Fast Money."
On Thursday, Citigroup cited heightened competition as well as concerns over monetization as reasons for the recent downgrade to neutral from buy and a $20 price target.
Furthermore, short-sellers are piling in to the stock ahead of its lock-up expiration. "There are a lot of people who have been very pessimistic about this story right out of the gate, having a 30 billion or so market cap, wanting to short it," Nathan said.
As Snap's July 30 lock-up expiration and second quarter earnings approach, "the options market is implying about a 25 percent move in either direction," Nathan said. "That's not so crazy when you think about the fact that the stock closed down 21.5 percent after that first quarter they reported last month."
However, Nathan noted that "it's really expensive to short the stock, and it's really difficult to buy puts to this because the put premiums are so elevated here, so for the time being unless it gets really overdone on the downside, it seems like a no touch to me."
Snap shares closed at $18.85 on Thursday — only about 9 percent higher from its IPO price of $17. The stock was trading near $18 during midafternoon trading Friday.