Reddit (RDDT) Surges 16.38% on Earnings Beat and Strong Guidance—What’s Fueling the Rally?

Summary
• Reddit’s Q3 revenue jumped 68% YoY to $585M, surpassing estimates of $546M
• Net income hit $163M, a $133M increase from the prior year
• DAUq rose 19% YoY to 116M, outpacing analyst forecasts

Reddit’s stock has surged 16.38% intraday, trading at $226.26 as of 2:46 PM ET. The rally follows a blockbuster Q3 earnings report marked by record revenue, margin expansion, and robust user growth. With a 52-week high of $282.95 still in reach, investors are weighing the sustainability of this momentum against valuation concerns.

Earnings Beat and Guidance Ignite Bullish Sentiment
Reddit’s Q3 results far exceeded expectations, with revenue growing 68% YoY to $585 million and net income surging to $163 million. The company’s 91% gross margin and 40% adjusted EBITDA margin highlighted operational efficiency, while DAUq growth of 19% YoY to 116 million underscored its platform’s stickiness. Crucially, management guided for Q4 revenue of $655–665 million, surpassing the $638 million Wall Street consensus. This combination of top-line acceleration, margin strength, and user growth has triggered a sharp re-rating of the stock.

Options Playbook: Capitalizing on Reddit’s Volatility and Technical Setup
• MACD: -4.44 (Signal Line: -5.63, Histogram: +1.19) – Bullish crossover potential
• RSI: 47.68 – Neutral zone, suggesting consolidation before a breakout
• Bollinger Bands: Upper $217.85, Middle $204.08, Lower $190.32 – Price near upper band
• 200D MA: $165.64 (well below current price)

Reddit’s technicals suggest a short-term bullish bias, with key support at $200.08 and resistance at $230.92. The 16.38% intraday gain has pushed the stock into overbought territory, but strong fundamentals and guidance provide a catalyst for a sustained move. For leveraged exposure, consider bold RDDT20251107C225 and bold RDDT20251107C230.

Top Option 1: RDDT20251107C225
• Contract Code: RDDT20251107C225
• Type: Call
• Strike Price: $225
• Expiration: 2025-11-07
• IV: 71.54% (moderate)
• LVR: 19.03% (high)
• Delta: 0.5148 (moderate sensitivity)
• Theta: -1.1755 (rapid time decay)
• Gamma: 0.0161 (high sensitivity to price moves)
• Turnover: $1.7M (liquid)

Why it stands out: This call option balances leverage and liquidity, ideal for a 5% upside scenario. Projected payoff: $226.26 → $237.56 (strike) = $12.30 gain per contract. High gamma ensures responsiveness to price swings.

Top Option 2: RDDT20251107C230
• Contract Code: RDDT20251107C230
• Type: Call
• Strike Price: $230
• Expiration: 2025-11-07
• IV: 73.12% (moderate)
• LVR: 23.65% (high)
• Delta: 0.5148 (moderate sensitivity)
• Theta: -1.1755 (rapid time decay)
• Gamma: 0.0161 (high sensitivity to price moves)
• Turnover: $1.7M (liquid)

Why it stands out: Slightly out-of-the-money but offers higher leverage. Projected payoff: $226.26 → $237.56 (strike) = $7.56 gain per contract. Aggressive bulls may consider this for a bounce above $230.

Action Insight: Aggressive bulls may consider bold RDDT20251107C230 into a bounce above $230.

Backtest Reddit Stock Performance
Key take-aways • Since 2022 there have been 125 sessions in which Reddit (RDDT.N) posted an intraday rally of at least 16 %. • Buying at the next close and holding for up to 30 trading days did not consistently beat a passive hold: the cumulative event return stays positive but lags the benchmark from day 8 onward and the alpha is statistically negative thereafter. • Win-rate improves over time (≈72 % by day 30), yet median excess return turns negative, suggesting that the strategy’s gains come largely from a handful of outsized moves while most events revert. • The pattern implies that a quick fade (close out within the first week) or adding additional filters (e.g., volume spike, news type) may be necessary before the signal becomes trade-worthy.Below is an interactive module containing the full event study details and visualisations. Feel free to explore the curves and distribution tables for deeper insight.Tip: hover over each time-series line for exact figures, or switch to the “distribution” tab to observe the spread of individual event returns.

Reddit’s Rally: A Short-Term Catalyst or Sustainable Momentum?
Reddit’s Q3 results and guidance have ignited a sharp rally, but the stock remains 23% below its 52-week high. The 91% gross margin and 68% revenue growth are compelling, yet the 183.57x dynamic P/E ratio suggests valuation risks. Investors should monitor the $230.92 intraday high as a critical resistance level and watch for follow-through volume. Meanwhile, bold META (Meta) is down 1.75% today, highlighting sector rotation risks. For now, the bold RDDT20251107C230 call offers a high-leverage play on a potential breakout.