Please take a look at this image. It's the logo of the charity Childline.
How can I achieve this bubble wrapper effect around text in photoshop?
this effect is achieved by using multiple stroke FX's
if you also want to add a shadow effect, it would be best to do this to the largest stroke layer
You can do it (very roughly) by selecting the text and then go to Select>Modify>Expand. Then enter the value you want to expand it by and hit return. Then add a stroke to the selection.
However this will give you a jaggy result. You are best doing this in a vector package such as Illustrator.
There's a neater way. I'd personally always recommend avoiding duplicating layers for effects like this - it's a pain to maintain when (inevitably) someone wants a small change to the text or something needs to move.
Photoshop doesn't allow multiple strokes like in Illustrator, but you can effectively have up to three:
If you need a third stroke, use Drop Shadow with similar settings (spread: 100%, blend mode: normal). Or, you can save it for an actual drop shadow.
If you also want that plastic-y reflective sheen, you can get that with a Bevel & Emboss effect with a steep gloss contour and large size...
...though (hopefully...) the actual Childline logo designers placed theirs by hand (and hopefully using a vector design package).