Reddit Stock Ignites: Surge in Call Options Signals Big Bet

Key Points

• Reddit stock has added another item to the options traders' buying checklist, signaling confidence in its potential for new upside in today's market.
• A catch-up play to big tech is underneath Reddit's stock chart, with fundamentals to back it.
• Wall Street sees up to 50% upside from where the stock trades today, with chances of even more.

When investors spot an unusual amount of buying for a given stock, this typically creates the sort of curiosity that can lead to some of the most profitable rabbit holes. However, as this information is now readily available to all retail investors, the “smart money” in the market has figured out a way to still shift massive amounts of capital in a much quieter manner.

Through stock options, these large investors figured they could take advantage of the inherent leverage in these contracts in order to express a view on a stock without many finding out. However, there are no benefits without offsetting costs, and the cost of options is that they have an expiration date, which raises the stakes on these leveraged bets.

Most retail investors in the market may have missed an unusual number of call options for buying shares of Reddit Inc. NYSE: RDDT, as is probably intended by the large traders taking on this positioning. Now that the footprint has been identified, investors need to justify this decision quickly to capture a share of the upside potential before these options expire and the stock takes off.

Why Reddit Matters in This Market

Most market participants are aware (and likely involved) in the technology sector and its pursuit of the best and most powerful artificial intelligence models; however, not all realize that Reddit is just as significant a player in this space as other companies.

In fact, companies like Alphabet Inc. NASDAQ: GOOGL have collaborated with Reddit to access its user-generated text content. This is because, unlike LinkedIn or Twitter (now X), Reddit enforces relatively strict restrictions on the kind of content users can post.

One of these restrictions is that sales content and most marketing materials are unlikely to be allowed on Reddit, which leads to more organic and social-focused language on the platform. This type of data is crucial for training large language models (LLMs), providing a significant advantage for companies like Alphabet and its search engine, Google.

By now, most investors realize that this business model is not only stable and self-sustainable but also immune to most of the geopolitical and economic conflicts happening in the world today, so Reddit is now a safe haven for those looking for one.

The Upside in Reddit Is Intact

This might be the foundation behind the 87,739 call options purchased for Reddit stock as of mid-June 2025. Considering the leverage of these contracts, investors can assume this is a multi-million-dollar bet that Reddit stock will rise soon.

While the safer aspect of this business makes sense so far, investors still need to come up with a more justifiable factor if they are to understand why such an interest has been taken in the company with such a tight deadline. Here, more fundamental aspects come into play.

Because Reddit is a relatively smaller name compared to its technology peers, with a market capitalization of only $24.7 billion, it may have received less attention from the market during the recent bull runs the sector has experienced. More than that, the stock now trades at only 58% of its 52-week high, creating an even larger “catch-up” gap to be filled.

So as far as the charts are concerned, there is a solid reason to believe that Reddit stock can go much higher or at least retest its previous highs. By examining some of the fundamental factors, investors can look at where Wall Street analysts expect earnings per share (EPS) to go for the upcoming quarters.

With a forecast of up to $0.54 in EPS for the fourth quarter of 2025, these analysts anticipate that Reddit can deliver just over 300% in EPS growth by this time. As most in the market know where EPS goes, so does the stock price. Staring down the potential of triple-digit percentage upside may have been enough to motivate these options traders, but there’s more.

Over the past month, as much as 8.1% of Reddit’s short interest declined, indicating a sign of bearish capitulation as short sellers realized that the upside far outweighs the potential downside at these prices, forcing them to exit their positions early.

The cherry on top was Alan Gould’s, an analyst from Loop Capital, reiteration of a Buy rating for Reddit stock, this time coupled with a $200 per share valuation to call for 50% upside from where the stock has fallen today, creating another bullish pillar for prospective buyers to lean on moving forward.