Reddit (RDDT) Surges 8.96% on Earnings Beat – What’s Fueling the Momentum?

Summary
• Reddit (RDDT) shares jumped 8.96% intraday, trading at $211.85 as of 19:00 ET.
• Q3 revenue surged 68% to $585M, exceeding estimates by $35.47M, while EPS hit $0.80 vs. $0.52 expected.
• Daily active users hit 116M, up 19% YoY, with U.S. logged-in DAUq rising 7% to 23.1M.
Reddit’s explosive move follows a blockbuster earnings report that outperformed Wall Street’s expectations on both revenue and profit. The stock’s intraday high of $230.92 and low of $210.05 reflect sharp volatility, driven by a combination of robust financial results, strong user growth, and a bullish fourth-quarter outlook. With the Communication Services sector underpinned by AI-driven data licensing and advertising trends, Reddit’s performance underscores its role as a high-growth tech disruptor.

Earnings Beat and Optimistic Guidance Drive Reddit’s Surge
Reddit’s 8.96% intraday rally was catalyzed by a Q3 earnings report that far exceeded expectations. Revenue surged 68% to $585 million, with EPS at $0.80, well above the $0.52 forecast. The company’s user growth metrics—116 million daily active uniques (up 19% YoY) and 23.1 million U.S. logged-in DAUq (up 7% YoY)—reinforced its value proposition. Additionally, Reddit’s guidance for $660 million in Q4 revenue (ahead of $638 million estimates) signaled sustained momentum. The stock’s volatility reflects a mix of short-term profit-taking and long-term optimism about its AI data licensing partnerships and advertising scalability.

Social Media Sector Mixed as Meta Slides, Reddit Soars
The Communication Services sector saw divergent performances, with Reddit’s 8.96% gain contrasting sharply against Meta’s (META) 2.57% decline. While Reddit’s earnings beat and user growth metrics drove its rally, Meta’s shares fell amid concerns over its AI investment costs and a one-time tax charge. This divergence highlights Reddit’s unique positioning in the AI data licensing space and its ability to monetize user engagement through advertising and partnerships with firms like Google and OpenAI.

Options and ETF Plays for Reddit’s Volatile Momentum
• MACD: -4.44 (Signal Line: -5.63, Histogram: 1.19) – Indicates bullish crossover potential.
• RSI: 47.68 – Suggests neutral momentum, avoiding overbought/oversold extremes.
• Bollinger Bands: Upper $217.85, Middle $204.08, Lower $190.32 – Current price near upper band, signaling overextension.
• 200D MA: $165.64 (below current price) – Long-term bullish trend intact.
Reddit’s technicals suggest a continuation of its short-term bullish momentum, with key support at $200.02 and resistance at $217.85. The stock’s high volatility and leverage ratios in options make it a candidate for directional plays. Two top options from the chain stand out:

RDDT20251107C210
• Type: Call
• Strike: $210
• Expiration: 2025-11-07
• IV: 76.20% (high implied volatility)
• Leverage Ratio: 22.08% (moderate)
• Delta: 0.5248 (moderate sensitivity)
• Theta: -1.1066 (high time decay)
• Gamma: 0.0168 (moderate sensitivity to price changes)
• Turnover: $5.68M (high liquidity)
This call option offers a balance of leverage and liquidity, ideal for capitalizing on a continuation of Reddit’s upward trend. A 5% upside from $211.85 to $222.44 would yield a payoff of $12.44 per contract, with delta and gamma amplifying gains as the stock moves.

RDDT20251107C215
• Type: Call
• Strike: $215
• Expiration: 2025-11-07
• IV: 75.06% (high)
• Leverage Ratio: 29.24% (high)
• Delta: 0.4403 (moderate)
• Theta: -1.0132 (high time decay)
• Gamma: 0.0169 (moderate)
• Turnover: $1.43M (solid liquidity)
This contract’s high leverage ratio and IV make it a speculative play for aggressive bulls. A 5% move to $222.44 would generate a $7.44 payoff, with gamma enhancing returns as the stock accelerates. Both options are well-positioned for a bullish continuation, with RDDT20251107C210 offering a safer entry and RDDT20251107C215 providing higher reward potential. Aggressive bulls may consider RDDT20251107C210 into a bounce above $217.85.

Backtest Reddit Stock Performance
Below is an interactive report that summarises the back-test of a “9 % Daily-Surge Momentum” strategy on Reddit (ticker RDDT.N) from 2022-01-01 to 2025-10-31. Key implementation notes (assumptions filled in by Aime):• “Intraday surge” was approximated with end-of-day data – we flagged any session where the closing price finished ≥ 9 % above the prior close. (Intraday minute data were not available via the current data interface.) • Entry rule: buy at the close on any day that meets the ≥ 9 % surge criterion. • Exit rule: positions were held until the test end-date (i.e., a long-only, buy-and-hold after each trigger). No additional risk controls (stop, take-profit, max hold days) were applied. • Prices used: daily close. • Back-test period: 2022-01-03 to 2025-10-31. You can review the full performance statistics, equity curve and trade list in the module below.Guide: scroll within the module to explore the equity curve, trade-by-trade details, and full metric set.Summary of headline metrics (for quick reference):• Cumulative return: +66.4 % • Annualised return: 52.8 % • Max drawdown: –61.4 % • Sharpe ratio: 0.83 Interpretation:1. The strategy captured several strong post-surge trends, producing a solid overall gain, but suffered deep interim drawdowns, indicating many surges faded or reversed. 2. The single-sided entry/hold design leads to concentration risk; adding exit rules (e.g., fixed holding window or trailing stop) could materially improve risk-adjusted performance. 3. For a more precise “intraday surge” study, querying intraday bar data (if/when available) would allow triggers based on true high-to-low moves within the same session.Feel free to ask for alternative exit rules, risk controls, or deeper diagnostics.

Reddit’s Momentum Unlikely to Fade – Watch for $210.05 Support and $230.92 Resistance
Reddit’s 8.96% surge is underpinned by a rare combination of earnings outperformance, user growth acceleration, and AI-driven data licensing optimism. While the stock’s short-term bearish trend clashes with its long-term bullish trajectory, key technical levels—$210.05 (intraday low) and $230.92 (intraday high)—will dictate its near-term direction. Investors should monitor the 200-day moving average at $165.64 as a critical long-term support. Meanwhile, the sector leader Meta’s 2.57% decline highlights the importance of differentiating between AI-driven growth stories and capital-intensive plays. For those seeking exposure, the RDDT20251107C210 call offers a balanced approach to capturing Reddit’s momentum while managing risk.