After last week's impressive market debut, Reddit (RDDT.N) introduced options on Monday, prompting a flurry of bullish bets that some analysts claimed boosted the social media platform's shares.
Despite not making a profit since 2005, Reddit shares rose 48% on the New York Stock Exchange on Thursday as the firm went public. The largest New York Stock Exchange gainer on Monday was Reddit, up 30% to $59.80.
"The action is on the call side and collected around the upside," said Capital Market Laboratories CEO Ophir Gottlieb of Los Angeles. "With the stock trading higher on Day One, this feels like speculation for higher moves." Reddit's most traded contracts were $50–$75 April call options. Puts protecting against a decline below $25 by mid-April were most traded.
Bullish options activity may have contributed to Monday's stock bounce, analysts suggested. “It's always a bit of a chicken and egg discussion when it comes to active options and an active underlying stock,” said Interactive Brokers chief strategist Steve Sosnick.
A "gamma squeeze" in options has been connected to large price fluctuations in viral meme stocks like AMC Entertainment (AMC.N). "As the stock rises, market makers must buy more," said ORATS founder Matt Amberson.
He claimed Reddit options activity on Monday reminded him of individual investors trading meme stocks to express their opinions.
GameStop (GME.N), led the 2020 meme stock movement, rising as much as 100 times in 2021 on the emotion of WallStreetBets buyers. Capital Market Labs Monday's activities was unlikely to have a clear link, Gottlieb added.
The 2012 Facebook Inc. options listing, now Meta Platforms (META.O), had the most active options market launch with 360,000 contracts traded on the first day.
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