Reddit options launch draws bulls, as shares soar
By Saqib Iqbal Ahmed
NEW YORK (Reuters) -The launch of options on Reddit on Monday drew a flurry of bullish bets that some analysts said helped boost the social media platform's stock after last week's strong market debut.
Reddit shares soared 48% on the New York Stock Exchange as the company went public on Thursday, despite posting no annual profit since its launch in 2005.
Reddit was the top percentage gainer on the New York Stock Exchange on Monday, finishing up 30% at $59.80.
Some 90,000 Reddit options changed hands, with trades leaning toward bullish bets, analysts said.
«The action is on the call side and collected around the upside,» said Ophir Gottlieb, chief executive of Los Angeles-based Capital Market Laboratories. «With the stock trading higher on Day One, this feels like speculation for higher moves.»
April call options with strike prices of $50 to $75 were among the most actively traded Reddit contracts. Among puts, contracts guarding against a drop below $25 by mid-April were the most traded.
Calls convey the right to buy shares at a fixed price in the future, while puts offer the right to sell them at a set price.
The bullish options activity could have been a factor in Monday's stock rally, some analysts said.
«It's always a bit of a chicken and egg discussion when it comes to active options and an active underlying stock,» said Steve Sosnick, chief strategist at Interactive Brokers (NASDAQ:IBKR).
«I think the options action is having an impact on today's price movement.»
When options traders buy calls, dealers who sell them are exposed to the risk of the underlying stock rallying above the contract price for future sales. As a hedge, dealers tend to buy the stock as it advances, adding more fuel to the
Read more on investing.com
