Reddit Skyrockets 4.97%—Is This the Dawn of a New Bull Cycle?

Summary
• Reddit (RDDT) surges 4.97% intraday, hitting a 52-week high of $255.29
• Legal scrutiny over alleged user traffic misrepresentation clashes with Jefferies’ $300 price target
• YieldMax® launches RDDT Option Income Strategy ETF (RDYY) as volatility spikes

Reddit’s stock has ignited a frenzy, surging nearly 5% in a single trading session to reclaim its 52-week peak. The move defies a lawsuit alleging misrepresentation of user traffic and a broader social media sector slump, as analysts like Jefferies raise price targets. With options volatility spiking and a new ETF entering the fray, the question looms: Is this a sustainable breakout or a fleeting surge?

Legal Scrutiny and Analyst Optimism Fuel Volatility
Reddit’s sharp intraday rally stems from a collision of bearish and bullish forces. A lawsuit alleging misrepresentation of user traffic—specifically how Google’s AI updates impact engagement—has cast a shadow over its valuation. Yet, Jefferies’ upgraded $300 price target (from $230) and Deutsche Bank’s $205 target highlight confidence in Reddit’s revenue acceleration (70% YoY growth) and expanding gross margins. Meanwhile, Reddit’s own Q2 results, including $70M revenue and $37M EBITDA beats, have stoked momentum. The stock’s pre-market pattern—opening 2-5% higher before retreating—suggests retail buying pressure clashing with institutional shorting, creating a volatile tug-of-war.

Social Media Sector Volatility Amid Legal Scrutiny as META Slides
The social media sector remains fragmented, with Reddit’s 4.97% gain contrasting sharply against Meta’s (META) -1.17% intraday decline. While Reddit’s legal woes and valuation debates dominate headlines, Meta’s struggles with ad revenue and user growth underscore sector-wide challenges. Reddit’s unique position as a user-generated content platform with rising monetization potential sets it apart, but the sector’s lack of consensus on growth models—whether Reddit’s $195.96 fair value (per Simply Wall St) or Jefferies’ $300 target—highlights divergent investor narratives.

Options Playbook: Capitalizing on Reddit’s Volatility with RDDT20250919C252.5 and RDDT20250919C255
• 200-day MA: $154.08 (far below current price)
• RSI: 57.28 (neutral, not overbought)
• MACD: 12.10 (bullish) vs. Signal Line 13.29 (bearish divergence)
• Bollinger Bands: Price at $252.14 (above upper band $248.33)

Reddit’s technicals paint a mixed picture: A short-term bullish trend clashes with a long-term ranging pattern. The 57.28 RSI suggests no immediate overbought conditions, while the MACD histogram’s -1.198 indicates weakening momentum. Key levels to watch include the 30D support/resistance range ($218.04–$220.07) and the 200D MA ($154.08).

Top Options Picks:
• RDDT20250919C252.5
- IV: 61.00% (moderate)
- Leverage Ratio: 24.19%
- Delta: 0.5289 (moderate sensitivity)
- Theta: -1.0106 (high time decay)
- Gamma: 0.015590 (high sensitivity to price swings)
- Turnover: 241,535 (liquid)
- Payoff (5% upside): $13.63 (max(0, 264.75 - 252.5))
- Why: High gamma and moderate delta make this call ideal for a breakout above $252.5, with liquidity ensuring easy entry/exit.

• RDDT20250919C255
- IV: 63.77% (high)
- Leverage Ratio: 25.95%
- Delta: 0.4922 (moderate sensitivity)
- Theta: -1.0000 (high time decay)
- Gamma: 0.014950 (high sensitivity)
- Turnover: 203,689 (liquid)
- Payoff (5% upside): $17.38 (max(0, 264.75 - 255))
- Why: High IV and gamma position this as a high-reward bet if Reddit’s legal cloud lifts and the stock breaks above $255.

Action: Aggressive bulls may consider RDDT20250919C252.5 into a breakout above $252.5, while RDDT20250919C255 offers higher leverage for a sustained rally.

Backtest Reddit Stock Performance
Below is your event-backtest. Highlights:• Event definition: any trading day where Reddit (RDDT.N) closed ≥ 5 % above the previous day’s close (close-to-close jump). • Data window: 2022-01-01 → 2025-09-10 (first trading data available 2024-03-21). • Total events captured: 60. • Average path after a 5 % surge: the stock tends to digest the pop over the next week (negative returns through day-5), then gradually resumes an up-trend, turning positive around day-7 and posting a +10.8 % median gain by day-30. • Win-rate climbs from ~32 % (next-day) to ~64 % after one month. • Nonetheless relative performance vs. benchmark is negative across most horizons, suggesting that 5 % spikes have generally meant short-term over-extension.(We defaulted to close-to-close returns because intraday tick data are not available in the current tool set, and we auto-set the start date to 2022-01-01 to match your request even though the IPO occurred in March-2024.)Please explore the interactive panel for full statistics, cumulative-return curves and distribution tables.Feel free to drill down into specific event instances or adjust the holding-period window if you’d like additional views.

Reddit’s Crossroads: Legal Risks vs. Analyst Optimism—What to Watch Now
Reddit’s 4.97% surge reflects a tug-of-war between legal headwinds and analyst optimism. While the lawsuit over user traffic and a $195.96 fair value narrative (per Simply Wall St) pose risks, Jefferies’ $300 target and Q2 results suggest a bullish case. Investors should monitor the 200D MA ($154.08) as a critical support level and watch Meta’s (-1.17%) performance for sector sentiment. For options traders, RDDT20250919C252.5 and RDDT20250919C255 offer high-gamma plays on a breakout. If Reddit sustains above $252.5, the bull case gains momentum; a retest of the 30D support ($218.04) could signal a deeper correction.