To The Moon

A surge in call options for $Reddit(RDDT)$ stock is indeed signaling a "big bet" from investors, often referred to as "smart money." The recent surge in call options for Reddit (RDDT) is a strong signal that institutional and high-conviction traders are placing big upside bets on the stock’s near-term trajectory.

In this article I would like to explore the reason why and what does it really implies, and also share how I would be using the signal for a short-term swing trade.

What Is Happening in the Options Market

Recent reports indicate a significant amount of call options being purchased for RDDT, with one source mentioning 87,739 call options as of mid-June 2025, representing a multi-million-dollar bet. This activity suggests strong bullish conviction for Reddit stock in the near future.

Over 87,000 call contracts were purchased in mid-June — a massive spike that dwarfs typical volume.

The Put/Call ratio dropped to 0.16, showing a heavy skew toward bullish bets.

Popular strikes include the $140 and $117 calls, suggesting traders expect a breakout above current levels ($143).

Implied volatility rose to 68.61%, reflecting heightened expectations for a sharp move.

What a Surge in Call Options Means

Bullish Sentiment: A call option gives the buyer the right, but not the obligation, to purchase a stock at a specified "strike price" by a certain "expiration date." When there's a significant increase in the buying of call options, it indicates that a large number of investors believe the stock's price will rise above the strike price before the expiration date.

Leverage: Options offer leverage. A relatively small investment in options can control a much larger value of the underlying stock. This means that if the stock moves favorably, the percentage gains on the option can be significantly higher than directly buying the stock. For large investors, this allows them to make substantial bets without moving the underlying stock price as much as a direct stock purchase might.

Implied Volatility (IV): A surge in call option demand can also drive up the implied volatility of those options. High implied volatility suggests that the market expects significant price movement in the underlying stock.

Potential for Price Movement: While it's not a guarantee, a surge in call options often precedes or accompanies upward price movement in the underlying stock, as those who bought the options might eventually exercise them or the increased demand for options itself can create positive sentiment.

Several factors are likely contributing to this bullish sentiment

AI Monetization: Reddit has been actively launching new AI-powered advertising features, such as "Reddit Insights" and "Conversation Summary Add-ons." These tools aim to leverage Reddit's vast user-generated content for marketing insights, attracting advertisers seeking engaged consumers. This is seen as a significant step toward monetizing its unique platform and closing the gap with larger competitors. Reddit’s data is being licensed to firms like Alphabet to train large language models — a high-margin, recurring revenue stream.

Data Licensing: Reddit's data licensing deals, particularly with companies like Google for training large language models (LLMs), are a key revenue driver and are viewed as a stable and sustainable business model.

Market Position and Valuation: Despite its recent IPO and volatility, some analysts see Reddit as a relatively smaller player in the tech space compared to its peers, trading at a discount from its 52-week high. This "catch-up" potential, coupled with strong forecasted EPS growth (over 300% for Q4 2025 according to some analysts), makes it an attractive target for investors looking for growth.

Short Interest Decline: A decline in short interest (bearish bets) for Reddit stock suggests that short sellers are capitulating, further reinforcing the bullish sentiment.

Strong fundamentals: Q1 2025 revenue jumped 61% YoY, with 90.5% gross margins and 32% FCF margin — rare for a social platform.

Catch-up play: Reddit is still trading well below its IPO high ($230), while peers like Meta and Snap have rebounded sharply.

Analyst Endorsements: At least one analyst from Loop Capital recently reiterated a "Buy" rating for RDDT with a $200 price target, signaling a significant upside. Consensus analyst ratings also show a "Buy" recommendation for RDDT.

Important Considerations for Investors

While a surge in call options is generally a bullish sign, investors should be aware of the following:

Speculative Nature: Options trading, especially high-volume call option activity, can be highly speculative. These are leveraged bets, and if the stock does not move as expected, the options can expire worthless, leading to a 100% loss of the premium paid.

Expiration Dates: Options have a limited lifespan. The "big bet" implied by these call options comes with a tight deadline, meaning the anticipated price movement needs to occur within a specific timeframe.

Underlying Fundamentals: While options market activity can signal sentiment, it's crucial to always evaluate the underlying company's fundamentals. Reddit's ability to consistently grow its user base, diversify revenue streams beyond Google search traffic, and effectively monetize its platform through new ad tools and data licensing will be key to its long-term success.

Legal Challenges: It's important to note that Reddit is currently facing class-action lawsuits related to its disclosures regarding the impact of Google's AI features on user traffic. These lawsuits allege that Reddit downplayed the negative effects of Google's AI Overview on its user growth and advertising revenue. Investors should monitor these legal developments as they could impact the stock.

What to Watch Next

Earnings on July 31st: Could be the catalyst these call buyers are betting on.

Breakout zone: If RDDT clears $150–$155 with volume, it could trigger a gamma squeeze.

Risk: Options have expiration dates — if the move doesn’t happen soon, those bets decay fast.

In the next section we will be exploring a full breakdown of Reddit (RDDT) from both a technical setup and valuation vs. peers perspective, so we can see if the options surge is backed by fundamentals and price action.

Technical Setup: Reddit (RDDT)

RDDT is forming a bullish continuation pattern with strong institutional flow and momentum confirmation. A breakout above $150–$155 could trigger a gamma squeeze.

Valuation vs. Peers

Reddit trades at a premium multiple, but its growth rate (+61% YoY revenue) and AI data licensing model justify the valuation for growth investors.

Risk-Reward Snapshot

Technical Analysis - Exponential Moving Average (EMA)

We are seeing RDDT RSI momentum showing strong positive movement, and the bulls are defending the short-term key level well, this set up a stage for some nice swing trade, and I believe the bulls would continue to make an attempt for daily uptrend continuation.

As we might experience a small dips, that would make the accumulation potential to be at around $133 to $138, but I would set my stop loss at $128 based on recent consolidation seen on the chart.

So if RSI momentum continue its strength and volume build up, we could be seeing a breakout trigger at around $150 to $155. So I would be planning for a short-term swing, with price target for profit taking around $172.

Summary

The surge in call options for Reddit stock does indicate a significant bullish bet by some investors, driven by optimism around its AI monetization efforts, data licensing, and perceived undervaluation.

However, as investors, we should always conduct our due diligence, understand the risks associated with options trading, I always believe in keeping an eye on the company's financial performance and any ongoing legal issues.

I would be using the signal from surge in call options as a bullish signal for a short-term swing trade setup.

Appreciate if you could share your thoughts in the comment section whether you think Reddit would be in a good position for a short-term swing trade based on bullish signal coming from surge in call options which trigger big bets.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.