Reddit’s share price surged even higher Tuesday morning trading after a big rally the day before. The stock rose to a new high of $74.80 after market open — more than double its initial public offering (IPO) price of $34.
The reason? Analysts say the launch of options trading is giving bulls a chance to get extra bullish about where Reddit’s stock price will go — and that’s boosting its share price in real time. About 90,000 options changed hands on Monday, according to Reuters.
“The action is on the call side and collected around the upside,” Ophir Gottlieb, chief executive of Los Angeles-based Capital Market Laboratories, told the outlet. A call is the right to buy an asset in the future at a set price. Investors who are optimistic about a company’s success buy calls, and in doing so, signal where they think its share price will go.
Reddit’s stock price has pulled back since reaching its new high over $70 — but only a little. The social media site’s share price was up 15% to just over $68 mid-morning. On Monday, shares rose 30% to close at $59.80, making it a top gainer on the New York Stock Exchange.
Reddit’s continued good fortunes are somewhat of a surprise after experts expressed skepticism ahead of its IPO last week. Their suspicions were well-founded. For one, Reddit is a historically money-losing company — and for another, its own members have a history of shorting companies on the market. When Reddit offered 8% of its IPO shares to board members and Redditors, it disclosed fears that those same Redditors could make Reddit a meme stock — and create major volatility in its share price. Those Redditors were not subject to lock-up agreements, meaning they could have sold their shares in the company immediately and driven the price down.
But against the odds, Reddit continues to thrive — a positive sign for the IPO market in 2024.