The Snap Inc (NYSE:SNAP) boom/bust cycle I’ve talked about repeatedly this year remains in full swing. After an impressive surge off all-time lows, it’s time once again for SNAP stock to reverse course.

For savvy options traders, that means a bear play on SNAP stock.

Technically, SNAP shares are up an impressive 33% from their May lows. The shares have filled in their post-earnings gap lower, and even reclaimed former support at their 50-day moving average.

SNAP stock has ridden to this recent high by a series of bullish media reports. The company signed a partnership deal with Pandora Media Inc (NYSE:P) to share playlists and music choices with family and friends on SNAP. The move helped support bullish sentiment on SNAP stock.

The biggest driver for the recent rally, however, was a likely short-squeeze play. Last week, S3 Partners highlighted what it called “an avalanche of stock loan recalls.” In other words, stock loan availability is drying up, putting pressure on short sellers to cover their bets due to rising borrowing rates.

As of the most recent reporting period, some 123 million shares of SNAP stock were sold short — representing more than 19% of the stock’s total float. If these shorts were forced to buy back their positions, it could account for much of SNAP’s recent rally.

Click to EnlargeBut that rally is about to hit a snag. SNAP stock is facing stiff overhead resistance in the $15 region. First, the shares’ 200-day moving average lies just overhead. Second, the $15 level itself has long been a support/resistance level for SNAP stock.

After the past month’s run up, it would be a natural place for those that got in at the lows to take profits. This is doubly true given that SNAP stock is nearing oversold levels, with it’s relative-strength index on the edge of 70. Support for this pullback, meanwhile, emerges in the $12.50-$13 region, marking a potential 12% decline for SNAP stock over the short-term.

Two Trades for SNAP Stock

Bear Put Spread: With the bull run on SNAP stock running out of steam, it’s time to position yourself for a pullback. Traders looking to profit from a short-term decline might want to consider a July $13/$14 bear put spread.

At last check, this spread was offered at 42 cents, or $42-per-pair of contracts. Breakeven lies at $13.58, while a maximum profit of 58 cents, or $58-per-pair-of-contracts is possible if SNAP stock closes at or below $13 when July options expire.

Note: The July 13.50 put is also being made available this week. However, this strike has no open interest and no bid/ask spread at the moment. Traders might consider this strike as an alternative to lower breakeven (and potentially increase profit potential) once it becomes more established.

Put Sell: For a more neutral play on SNAP stock, traders might consider a July $12 put sell. Short-term support should hold in the $12-$12.50 region through expiration, keeping this option out of the money. 

At last check, this put was bid at 15 cents, or $15-per-contract. The upside to this put sell strategy is that you keep the premium as long as SNAP stock closes above $12 when July options expire. The downside is that should SNAP trade below $12 ahead of expiration, which is a possibility if the broader market goes south on trade concerns, you could be assigned 100 shares for each sold put at a cost of $12-per-share.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.