Reddit (RDDT) Surges 8.6% on Earnings Beat and Strong Guidance – What’s Next for the Social Media Giant?

Summary
• Reddit’s shares jumped 8.6% intraday, trading at $211.24 as of 18:40 ET.
• Q3 revenue surged 68% YoY to $585M, exceeding estimates of $546M.
• Global DAUq hit 116M, up 19% YoY, with U.S. logged-in DAUq at 23.1M.
Reddit’s Q3 earnings report ignited a sharp rally, driven by record revenue, robust user growth, and optimistic fourth-quarter guidance. The stock’s 8.6% surge reflects renewed confidence in its ad and data licensing business, despite slowing U.S. user growth and sector headwinds from AI-driven search competition.

Earnings Beat and Optimistic Guidance Drive Reddit’s Rally
Reddit’s 8.6% intraday surge stems from a triple threat: a 68% YoY revenue jump to $585 million, a 19% YoY increase in global DAUq to 116 million, and fourth-quarter sales guidance of $655–665 million (above $638M estimates). CEO Steve Huffman highlighted strong ad revenue and data licensing partnerships with Google and OpenAI, while COO Jen Wong emphasized global marketing campaigns to boost user acquisition. The stock’s volatility—up from $194.42 to $211.24—reflects investor optimism about Reddit’s ability to monetize its user base despite slowing U.S. DAUq growth and AI-driven search competition.

Interactive Media Sector Mixed as Reddit Outperforms Meta’s Decline
The Interactive Media & Services sector saw divergent performances, with Reddit’s 8.6% rally contrasting Meta’s 2.76% intraday decline. While both companies rely on user engagement and advertising, Reddit’s data licensing revenue (up 7% YoY to $36M) and strong Q3 guidance positioned it as a growth outlier. Meta’s weaker user growth and cautious Q4 guidance underscored sector-wide challenges in monetizing AI-driven traffic shifts.

Options and ETF Plays for Reddit’s Volatile Rally
• MACD: -4.44 (Signal: -5.63, Histogram: +1.19) – bearish short-term divergence.
• RSI: 47.68 – neutral, suggesting potential for a rebound.
• Bollinger Bands: Upper at $217.85, Middle at $204.08, Lower at $190.32 – price near upper band.
• 200D MA: $165.64 (below current price).
Reddit’s technicals show a short-term bearish trend but a long-term bullish setup. Key levels to watch: support at $200.02 (30D) and resistance at $217.85 (Bollinger Upper).

Top Options Picks:
• RDDT20251107C210 (Call, $210 strike, Nov 7 expiry):
- IV: 66.03% (high volatility)
- Leverage Ratio: 23.01%
- Delta: 0.556 (moderate sensitivity)
- Theta: -1.068 (rapid time decay)
- Gamma: 0.019 (high sensitivity to price swings)
- Turnover: $5.64M (liquid)
This call option offers aggressive upside potential if Reddit breaks above $210, leveraging high gamma and liquidity for quick entry/exit.

• RDDT20251107P210 (Put, $210 strike, Nov 7 expiry):
- IV: 69.46% (high volatility)
- Leverage Ratio: 55.86%
- Delta: -0.2698 (moderate bearish bias)
- Theta: -0.1368 (slow time decay)
- Gamma: 0.015 (moderate sensitivity)
- Turnover: $361K (liquid)
This put option provides downside protection if Reddit retests $210, with high leverage and moderate delta to capitalize on volatility.

Payoff Scenario: A 5% upside to $221.80 would yield a 10.7% return on the $210 call (payoff: $11.80). A 5% downside to $200.67 would yield a 4.7% return on the $210 put (payoff: $9.33).

Action: Aggressive bulls should target the $210 call for a breakout play, while cautious bears may hedge with the $210 put. Watch for a break above $217.85 (Bollinger Upper) to confirm bullish momentum.

Backtest Reddit Stock Performance
Below is the interactive back-test dashboard. It describes how the strategy was constructed (buy Reddit when the previous day’s close-to-close jump ≥ 9 %, exit on the earlier of 30 % gain, 8 % stop-loss or 20 calendar-day limit) and presents the performance results from 2022-01-01 through 2025-10-31.Key take-aways (interpretation):• The strategy failed to capture sustainable follow-through after large up-days; overall performance was negative and risk-adjusted returns were weak. • All winning trades were offset by larger or more frequent losses, indicating mean-reversion behaviour rather than momentum in Reddit’s historical price action. • Tightening the entry threshold, shortening the holding cap, or switching to intraday execution might mitigate the drawdown, but the current rules appear unattractive in their present form.(Default choices: stop-loss 8 %, take-profit 30 % and 20-day holding cap were applied as widely-used momentum-capture parameters; if you’d like different risk controls or an alternative exit rule, just let me know.)

Reddit’s Rally Faces Crucial Test – Here’s How to Position
Reddit’s 8.6% surge is a high-stakes bet on its ability to sustain user growth and monetize AI partnerships. The stock’s proximity to its 52-week high ($282.95) and Meta’s 2.76% decline highlight divergent sector dynamics. Investors should monitor the $217.85 Bollinger Upper level for a bullish breakout or a pullback to $200.02 (30D support) for a potential rebound. For now, the $210 call and put options offer leveraged exposure to Reddit’s volatility, with the sector’s mixed performance underscoring the need for disciplined risk management.