Reddit Soared 6.76%—What's Unleashing This Viral Rally?

Summary
• RDDT surged 6.76% to $225.38, hitting an intraday high of $227.00
• Turnover spiked to 4.22 million shares, 3.55% of its float
• Technical indicators signal a short-term bearish reversal amid long-term consolidation
Reddit’s explosive intraday rally has ignited market attention, with the stock surging 6.76% above its 52-week range. The move defies its short-term bearish trend and a bearish engulfing candlestick pattern, raising questions about the catalyst. With options volume surging in out-of-the-money calls and implied volatility spiking, traders are scrambling to decode this sudden momentum.

Options Volatility and Short-Term Reversal Signal
The sharp 6.76% rally in RDDT appears driven by a surge in call options activity and a technical reversal signal. The bearish engulfing pattern—where a large bullish candle follows a bearish one—typically signals a short-term bottom. Coupled with a MACD histogram turning positive (-4.06 to +14.52) and RSI hovering near neutrality (49.52), the move suggests a short-covering rally. High-volume call options like RDDT20250905C220 (827,965 turnover) indicate aggressive bullish positioning ahead of the September 5 expiration.

High-Leverage Call Options and Technical Breakout Setup
• 200-day average: 150.11 (well above) • RSI: 49.52 (neutral) • MACD: 14.52 (bullish crossover) • Bollinger Bands: $225.38 near upper band ($255.98) • Gamma: 0.0193 (high sensitivity) • Theta: -1.03 (rapid time decay)
Reddit’s technicals point to a breakout scenario. The stock is testing its 52-week high ($253.14) and has pierced the upper Bollinger Band. Aggressive bulls should target the $227.50 resistance (50% Fibonacci retracement) and consider the following options:
• RDDT20250905C220 (Call, $220 strike, 9/5 expiry): • IV: 54.76% (moderate) • Leverage Ratio: 20.61% • Delta: 0.637 • Theta: -1.03 • Gamma: 0.0193 • Turnover: 827,965 • Payoff at 5% upside: $16.65/share • High liquidity and gamma make this ideal for a short-term breakout.
• RDDT20250905C225 (Call, $225 strike, 9/5 expiry): • IV: 52.72% • Leverage Ratio: 28.57% • Delta: 0.5359 • Theta: -0.94 • Gamma: 0.0212 • Turnover: 303,486 • Payoff at 5% upside: $11.65/share • Strong gamma and moderate delta position this as a high-reward play if the $227.50 level holds.
Action: Buy RDDT20250905C220 for a 5% upside target. If $227.50 breaks, add RDDT20250905C225 for extended gains.

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Breakout or False Dawn? Watch $227.50 and Gamma-Driven Volatility
Reddit’s 6.76% surge hinges on its ability to hold $227.50, a critical Fibonacci level and psychological barrier. The MACD crossover and high gamma in call options suggest a self-fulfilling breakout scenario. However, the 52-week high at $253.14 remains a distant target. Sector leader Meta (META) is up 0.33%, offering limited sector support. Immediate action: Buy RDDT20250905C220 for a 5% upside target. Monitor $227.50—break above it to trigger the second leg with RDDT20250905C225. Alert: If $225.38 closes below $212.50, re-evaluate the bullish case.