Reddit Stock Options: Is Investor Appetite for Loss-Making Companies Returning?

investing.com:

With Reddit options able to be traded from today, it has sparked discussions about the potential resurgence of investor appetite for loss-making companies. So far this year, we have seen a trend of retail investors showing a slightly increased interest in high-risk, high-reward investments once again.

With Reddit options now available to trade, a closer examination of the factors driving the potential renewed interest in companies with a history of losses is beginning to take place.

The Reddit IPO brought about some excitement for traders, and now, with RDDT options being traded, it has introduced a new dynamic to the Reddit stock story. According to Bloomberg Reddit’s option volume topped 8,000 contracts within 45 minutes of trading, “led by a put protecting against a near 50% slide in shares within a month.”

Furthermore, Bloomberg said that by 10:15 a.m. in New York, around 1.5 puts had traded for every call, with the volume led by small contracts.

That volume aligns with what many were seeing on the popular WallStreetBets subreddit, where many had said they aimed to short the stock by buying put options.

Speaking to Investing.com, Garrett DeSimone, the head quant at OptionMetrics, said: “Given the hype surrounding the RDDT IPO last week, I expect there will be significant activity in these options.”

DeSimone also stated that the Reddit options are likely going to be expensive from a premium standpoint, “which is typical with hot-name IPOs.”

“Additionally, I anticipate puts to fetch more exorbitant prices compared to calls at the same strike,” he added. “This is due to the fact that short sales are extremely difficult, if not impossible, during the 60-day lockout period.”

Despite the sentiment, Reddit shares are up