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If you can't find watermelon schnapps, then you might try a light rum, Southern Comfort, just Vodka, or a smooth Tequila - and you can still call it a watermelon margarita if you'd like!
You can also easily make this a watermelon martini by using the same amount of booze, but reducing the amount of juice/lime/sugar. Put in a bar shaker full of ice and get really, really cold; after straining, I put in the freezer for 30 minutes - this way, your watermelon martini will be very cold - sip and enjoy!