Market Volatility Increases: How Wall Street Traders Profit from Reddit Stock
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This article will introduce how traders have profited from Reddit stocks amidst the recent increase in volatility in the U.S. stock market.
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Last week, driven by the U.S. election and Tesla's earnings report, the volatility in the U.S. stock market increased significantly. Tesla's stock plunged over 12% in a single day after its earnings report, sparking a rise in market panic.
How do traders operate in such a highly volatile market?
TradingFlow team has identified profit opportunities by trading Reddit ($RDDT) stock. On Monday, 22 July, trading signals indicated traders were shorting Reddit. TradingFlow detected unusual activity in Reddit's put options expiring on 9 August with a strike price of $62. Traders bought a large number of these put options when the stock was around $69.75, with an average contract price of $3.37.
From a more precise change in Open Interest (OI), it appears that traders opened over 2,000 new put option positions that day. (Note: The change in OI for a given trading day can only be observed on the following trading day. For example, the OI change for 22 July can be viewed on 23 July.)
Subsequently, Reddit's stock price continued to decline. On Wednesday, 24 July, the intraday low of Reddit's stock approached $62, and the average price of the put options purchased by traders reached $5.58, yielding a profit of over 60% for them.
According to the OI changes, as of 26 July, traders had likely not yet closed their profitable positions and even increased their holdings on 24 July. As of this writing, Reddit's stock price stands at $60.85, hovering around its one-month low, with traders' unrealized gains further expanding.
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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Before making any financial investment decisions, please ensure you thoroughly understand all aspects of the information and conduct your own research.
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