Story
Reddit Stock Options Signal 12% Potential Swing on Upcoming Earnings
Summary
Options market data indicates traders are pricing in a potential 12% move for Reddit (RDDT) shares following its earnings report on July 30. The company's stock has exceeded the implied move in three of its last eight releases.
The options market is pricing in a potential 12% move in either direction for Reddit Inc. (NYSE:RDDT) shares following the company's upcoming earnings report, scheduled for after the market close on July 30.
Market Expectations
This implied move is derived from the pricing of options contracts and reflects investor expectations for stock price volatility surrounding the earnings release, according to data compiled by Bloomberg. Traders use options to bet on or hedge against significant price swings that often accompany quarterly financial disclosures.
While the market anticipates a double-digit percentage change, this figure does not predict the direction of the move. It only gauges the magnitude of the potential price reaction based on current options activity.
Historical Performance
AdThe social media company's stock has a history of significant swings, exceeding the options-implied move in three of its past eight earnings announcements. This track record highlights the potential for outsized reactions compared to market expectations.
Key past earnings reactions include:
- April 30: The stock rose 1.3%, well below the 12.1% implied move.
- February: Shares fell 27.6%, significantly surpassing the 10.1% implied move.
- October 29, 2024: The stock experienced its largest move, jumping 47.7% compared to an implied move of just 10.7%.
Investors will be watching closely to see if Reddit's actual results and forward guidance will trigger the level of volatility currently being priced in by the options market.
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