Reddit Soars 17% on Q2 Triumph: Can AI Tailwinds Sustain the Momentum?

Summary
• Reddit (RDDT) surges 17% to $187.90, hitting a $196.67 intraday high after crushing Q2 results
• Revenue jumps 78% YoY to $500M, with 21% DAU growth and $535M–545M Q3 guidance
• AI-driven platform value spikes as Reddit becomes 'most cited domain for AI models'
• Sector peers struggle: GOOGL down 1.68%, SOCL ETF declines 1.07% despite RDDT’s rally

Reddit’s 17% intraday surge defies a broader market selloff, fueled by record Q2 performance and AI-driven optimism. With a 21% DAU rise and $500M revenue beating estimates by 18%, the stock has vaulted from $160.59 to $187.90—its highest level since June 2024—amid growing institutional buying pressure and strategic AI positioning.

Q2 Earnings & AI Synergy Ignite Rally
Reddit’s meteoric rise stems from a dual catalyst: Q2 revenue smashing estimates by 18% to $500M and a strategic pivot toward AI monetization. The platform’s 21% year-over-year DAU growth to 110 million underscores its expanding influence as a data repository for AI training. CEO Steve Huffman’s emphasis on Reddit being the 'most cited domain for AI models' has reignited investor confidence, with forward guidance projecting 55% YoY revenue growth and $185M–195M in EBITDA. This positions Reddit as a critical infrastructure player in the AI arms race, attracting capital inflows amid sector-wide uncertainty.

Options Playbook: Capitalizing on RDDT’s Bullish Breakout
• 200-day MA: $137.81 (well below current price)
• RSI: 68.25 (overbought but within control)
• MACD: 4.43 (bullish divergence from signal line)
• Bollinger Bands: Price at $187.90 vs. upper band $157.19 (33% above, indicating strong momentum)

The technical setup favors continuation above the $180 psychological level. Key support at the 200-day MA ($137.81) and resistance at the 52-week high ($230.41) define the trading range. While leveraged ETFs like SOCL (-1.07%) and IPO (-0.52%) underperform, the options chain reveals high-conviction plays:
Top Option 1: RDDT20250808C190
• Code: RDDT20250808C190
• Type: Call
• Strike Price: $190
• Expiration: 2025-08-08
• IV: 66.53% (moderate)
• Leverage Ratio: 29.85% (strong)
• Delta: 0.4686 (moderate sensitivity)
• Theta: -0.9044 (aggressive time decay)
• Gamma: 0.0215 (high sensitivity to price swings)
• Turnover: $3.3M (liquid)

This call offers optimal leverage for a 5% upside scenario (target $197.29), with a projected payoff of $7.29 per contract. The high gamma ensures rapid premium appreciation as the stock approaches $190.
Top Option 2: RDDT20250808C195
• Code: RDDT20250808C195
• Type: Call
• Strike Price: $195
• Expiration: 2025-08-08
• IV: 66.83% (moderate)
• Leverage Ratio: 42.41% (attractive)
• Delta: 0.3667 (balanced)
• Theta: -0.7877 (manageable decay)
• Gamma: 0.0203 (responsive to price moves)
• Turnover: $5.4M (high liquidity)

This contract provides 42.4% leverage to Reddit’s AI-driven rally, with a 5% upside target ($197.29) yielding a $2.29 payoff. The moderate delta balances risk/reward, ideal for holding through the August 8 expiration.

Backtest Reddit Stock Performance
The backtest of RDDT's performance after an intraday surge of 17% shows favorable results, with win rates and returns indicating positive short-to-medium-term gains. Here's a detailed analysis:1. Event Frequency: The backtest identifies 165 events where RDDT experienced a percentage change greater than 17% intraday.2. Short-Term Performance: - 3-Day Win Rate: 58.79% of these events resulted in a positive return over the next three days, with an average return of 1.70%. - 10-Day Win Rate: The win rate increases to 64.24% over the next ten days, with an average return of 4.92%.3. Long-Term Performance: - 30-Day Win Rate: The highest win rate of 71.52% is observed over the next thirty days, with an average return of 15.93%. - Maximum Return: The maximum return during the backtest period is 27.10%, which occurred on day 58 after the initial surge.4. Cumulative Returns: The backtest shows that RDDT can build upon its initial momentum, with cumulative returns of 15.93% over 30 days, indicating strong medium-term performance.In conclusion, an intraday surge of 17% in RDDT typically leads to positive short-term and medium-term gains, making it a potentially favorable event for investors looking to capitalize on momentum-based strategies.

Seize the AI-Driven Breakout: Key Levels to Watch
Reddit’s 17% surge validates its AI-driven value proposition, with Q3 guidance suggesting momentum could extend beyond $200. The 200-day MA at $137.81 remains a critical support level, while the 52-week high at $230.41 offers a long-term target. As sector leader GOOGL (-1.68%) underperforms, RDDT’s outperformance highlights its unique positioning in the AI ecosystem. Aggressive bulls should monitor the $180 level for re-entry, while the RDDT20250808C195 call offers the best leverage for a sustained breakout. Watch for institutional buying pressure to confirm this as the new baseline.