The advertising pie is big but there’s a newly listed player this year that is starting to hoover in the ad revenue – Reddit.  

It’s a hot site that has managed to transform itself from a mostly community forum-style hang-out structure into one that is coming to terms with the significant monetization power of its millions of eyeballs.  Highly engaged users participate in thousands of topic-specific subreddits.  

But the interaction is deep, the users loyal, and that is music to the ears of advertisers who covet that kind of meaningfully engaged audience.  

Reddit is now discovering the many ways it can turn this interaction into dollars.  Ad revenue is growing as it unlocks potential from premium memberships, e-commerce, subscription markets and international expansion.  The possibilities are exciting – it almost reminds me of Facebook 15 years ago… But Reddit has the Facebook playbook right in front of it so ramping should be easier and social media is just that much bigger these days….with tons of cash and no debt, the sky’s the limit if they execute properly.

But is it also a stock that has risen almost 4-fold since April.  A 40% rise on recent earnings just might be considered exuberant.  Caution is warranted and a collar strategy could make sense to protect some of those gains.  Downside skew is surprisingly flat, which makes the put or put spread collar sensible here.  The trick is in picking the strikes and for that we need to look at Licia’s amazing chart.  Yes, it has reached escape velocity so it’s a little harder to read, but a retracement of around 50-60% of this recent move could be warranted if you really think the rally is overdone.  I don’t – my feeling is that this thing could be a very compelling buy on any significant selloffs. Today’s resilience in the face of serious technology stock selling is a testament to its strength. I would be looking to monetize that collar sooner rather than later