Investors in Reddit Inc (RDDT) gained access to new options expiring in December 2028 on October 4, 2023. Notably, a put contract at a $170 strike price is currently bid at $61.05. Selling this put would set the effective purchase price for shares at $108.95, which presents a potential discount compared to the current trading price of $172.79. There’s an estimated 75% chance this contract may expire worthless, offering a potential return of 35.91% on the cash commitment, or 14.58% annualized.
Additionally, a call contract at the $210 strike is bid at $68.25, committing investors to sell at that price. If RDDT shares are called away at expiration, total returns would reach 61.03%, though if the contract expires worthless, investors would retain both their shares and the premium, potentially boosting returns by 39.50%, or 16.04% annualized. Both put and call contracts feature an implied volatility of approximately 73%, while the actual trailing twelve-month volatility stands at 66%.
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