Reddit (RDDT) Surges 5.28% to 52-Week High: Can This Rally Sustain Momentum?

Summary
• Reddit (RDDT) rockets to $235.84, hitting a 52-week high of $237.35
• Q2 revenue growth of 78% and 21% DAU surge drive optimism
• Legal challenges and sector volatility cast shadows on momentum
Reddit’s stock has staged a dramatic comeback, surging 5.28% intraday to reclaim its 52-week high. The rally follows a Q2 earnings beat, robust user growth, and AI-driven product innovations. However, a looming securities fraud lawsuit and a weak sector backdrop—led by Meta’s (-1.17%) decline—introduce critical risks for traders.

Q2 Earnings and AI-Driven Growth Fuel Reddit’s Rally
Reddit’s surge stems from a combination of outperforming Q2 results and strategic AI advancements. The company reported 78% revenue growth, driven by digital advertising recovery and a 21% year-over-year increase in daily active users (DAUs) to 110.4 million. CEO Steve Huffman highlighted Reddit Answers’ 6 million users and partnerships with OpenAI and Google, positioning the platform as a search destination. Meanwhile, a Jefferies analyst upgrade and 18 out of 29 analysts rating the stock a 'buy' amplified bullish sentiment.

Interactive Media & Services Sector Volatile as Meta Slumps
The Interactive Media & Services sector remains fragmented, with Meta (META) down 1.17% despite Reddit’s rally. This divergence underscores Reddit’s unique growth narrative—fueled by AI monetization and user retention—versus Meta’s struggles with regulatory scrutiny and ad revenue headwinds. While Reddit’s DAU growth outpaces peers, sector-wide concerns about AI-driven traffic fragmentation and zero-click search trends persist.

High-Volatility Playbook: Leveraged Calls and Gamma-Driven Puts
• MACD: 21.03 (above signal line 15.16), RSI: 89.46 (overbought), Bollinger Bands: $236.16 (upper), $109.02 (lower)
• 200-Day MA: $143.11 (well below current price), Turnover Rate: 5.36% (healthy liquidity)
Reddit’s technicals suggest a short-term bullish trend amid long-term consolidation. Key resistance lies at $237.35 (52-week high), with support near $224.30 (intraday low). The RSI’s overbought condition and MACD divergence hint at potential pullbacks, but strong volume and gamma-driven options activity indicate sustained momentum.
Top Call Option: RDDT20250822C245 (strike: $245, expiration: 2025-08-22, IV: 58.34%, leverage: 42.17%, delta: 0.374, theta: -0.787, gamma: 0.0166, turnover: 1.79M). This contract offers high leverage and gamma sensitivity, ideal for a 5% upside scenario (target: $247.63). The moderate delta balances directional risk with time decay.
Top Put Option: RDDT20250822P230 (strike: $230, expiration: 2025-08-22, IV: 63.93%, leverage: 33.98%, delta: -0.377, theta: -0.0628, gamma: 0.0152, turnover: 907K). This put provides downside protection with high gamma and moderate IV, suitable for a 5% downside scenario (target: $224.04).
Payoff Estimation: A 5% upside (to $247.63) would yield $12.63 per share for the call, while a 5% downside (to $224.04) would net $7.96 per share for the put. Traders should prioritize the call for aggressive bullish exposure and the put for hedging against sector volatility.

Backtest Reddit Stock Performance
Reddit's (RDDT) stock performance after a 5% intraday surge shows a bullish trend, supported by strong technical indicators and backtest results.1. Short-Term Gains: The 3-day win rate is 59.76%, the 10-day win rate is 66.27%, and the 30-day win rate is 76.33%. This indicates a high probability of positive gains in the immediate aftermath of the surge.2. Cumulative Returns: The backtest shows that RDDT can build upon its initial momentum. Over 30 days, the cumulative returns are 15.93%, indicating strong medium-term performance.3. Maximum Returns: The maximum return during the backtest period is 27.10%, which occurred on day 58 after the initial surge. This highlights the potential for substantial gains if held for a longer period.4. Sector Leadership: Reddit's 6.13% surge outpaces Meta's 1.15% rise, demonstrating leadership within the Communication Services sector, which is benefiting from AI-driven data monetization opportunities.In conclusion, Reddit's (RDDT) stock performance after a 5% intraday surge shows a bullish trend, supported by strong technical indicators and backtest results. These factors suggest that aggressive investors may consider RDDT20250808C200 as a potential entry point, while hedgers could use RDDT20250815P190 for downside risk protection.

Reddit’s Rally Faces Crucial Juncture: Act Now or Miss the Wave
Reddit’s 5.28% surge reflects a mix of earnings optimism and AI-driven growth, but legal risks and sector headwinds demand caution. The stock’s proximity to its 52-week high and overbought RSI signal a potential consolidation phase. Traders should monitor the $237.35 level for a breakout confirmation and watch Meta’s (-1.17%) performance as a sector barometer. For those with a bullish bias, the RDDT20250822C245 call offers high leverage and gamma, while the RDDT20250822P230 put provides a safety net. Position sizing and stop-loss placement near $224.30 are critical in this high-volatility environment.