WHY DID I BUY $SNAP PUTS

Snap stock may be in for another rocky month.

Snap, which went public in early March, is nearing the end of its stock lock-up period for employees and early investors, which forbids those early shareholders from selling Snap stock for the company’s first 150 days on the stock market.

Typically, the end of a lock-up period means that lots of investors, and especially early employees, rush to sell the stock. Many of them have been waiting years to turn their stock awards into actual cash. It’s also usually a milestone that some long-term, vested employees use as a reason to leave the company, which is certainly a possibility with Snap. That’s a bigger issue in the long run than a dip in the stock price.

Regardless, there will soon be a whole lot of Snap stock eligible to trade on the public market. Citi Research projects that the lock-up’s expiration will free up 949 million new shares for trading, significantly more than the current float, which is 230 million shares, according to Snap’s S-1.

The 150-day lock-up period ends on Saturday, July 29, which means the first day of potential trading for most of these insiders — like early investors and former employees — is Monday, July 31.

But some of those insiders, namely current Snap employees, will have to wait almost two weeks longer, according to two sources familiar with the company’s structure.

That’s because Snap is scheduled to report its Q2 earnings on Aug. 10, which means that current employees will be in the midst of a pre-earnings blackout period on July 31 when the lock-up ends. The window of time around the company’s earnings report — where employees cannot trade company stock — is a way to protect against insider trading.

Usually, that blackout is lifted a few days after earnings, which means current employees will most likely be able to sell their shares beginning Monday, Aug. 14.

Companies often experience a stock dip when employees are finally free to sell their shares. The day Twitter’s lock-up ended, the stock dipped almost 18 percent from the previous day’s close. Facebook had multiple, staggered lock-up periods, but the stock still dipped a handful of times when those lock-ups ended.

It’s very possible that Snap will experience the same dip. The company has already had a rough start to life on the public markets, in part because it’s trying to fend off copycats from Facebook, but also because the growth of its young advertising business hasn’t impressed the way some early investors hoped.