Reddit options launch draws bulls as shares extend gains

The 2012 listing of options on Facebook Inc, now known as Meta Platforms, holds the record for the most active options market debut with some 360,000 contracts changing hands on the first day of trading.

Reddit options buyers leaned 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.

"Reddit trading is reminding me of meme stocks," said Matt Amberson, founder of options analytics service ORATS, referring to stocks with viral popularity among individual investors who often use options to express their views.

"Retail is in control and buying calls to the moon," Amberson said.

Meme stocks emerged in 2020, led by GameStop whose price rose as much as 100 times over several months in 2021, largely on the sentiment of individual buyers connected through the Reddit community forum WallStreetBets.

Commenters on Reddit's largest stock trading forums voiced skepticism about the long-term outlook for the money-losing company's shares.

"Considering that Reddit can serve as a forum for individual investor speculation, it's no surprise that we see heavy buying of upside, near-term calls," said Steve Sosnick, chief strategist at Interactive Brokers.

"The fact that we're seeing so much activity in far out-of-the-money options, in both directions, tells me that speculators are driving the trading today," he said.