Shares in Reddit, which surged last Thursday in their blockbuster IPO, exploded again Monday as bullish investors bought into options on the social media firm.
The tech stock went public at $34 and jumped 48% in its first day of trading. On Monday, it shot up again, adding $13.75 (or a gain of 30%) to end the trading day at $59.75.
The debut of options trading tied to Reddit appeared to fuel to stock’s steady rise, with tens of thousands of put/call options on the company starting to trade amid indications of bullish sentiment. Options can provide a sense of investors’ outlook on a stock into the future, with a call option giving the buyer the right to buy shares at a fixed price and a put option providing the right to sell at a certain price.
Publishing giant Condé Nast acquired Reddit for $10 million in 2006 before spinning it out into a separate company five years later, has booked several billion dollars in paper gains since the IPO.
Reddit has about 73 million daily users spread across its 100,000 “subreddits.” While it has grown steadily it remains a fraction of the size of Meta-owned Facebook or even smaller rivals like Snap or Twitter/X.
The communities on Reddit itself have an outsized voice in the perception of Reddit’s share price. The WallStreetBets subreddit played a key role in boosting the shares of GameStop and AMC Entertainment during the pandemic. In a rare opportunity for retail investors, Reddit offered tens of thousands of moderators and users the chance to invest in the IPO, which is usually reserved for a small class of insiders and institutional holders.