Unusual Options Activity: Robinhood (HOOD)

Internet brokerage firm Robinhood (HOOD) dropped 15 percent on Wednesday following weak earnings. One trader is betting on shares to rebound from its quarterly report.

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  • That’s based on the February 2024 $8 calls. With 98 days until expiration, 4,576 contracts traded compared to a prior open interest of 124, for a 37-fold rise in volume on the trade. The buyer of the calls paid $1.08 to make the bullish bet.

    Shares recently traded for about $8.35, making this a slightly in-the-money trade. Any rebound in Robinhood should lead to the option moving higher penny for penny, less any declining time premium.

    Following the drop, Robinhood shares are close to their 52-week low of $7.57, and look oversold on a short-term basis.

    While the broker is still seeing lower trading volumes compared to 2020 and 2021, Robinhood has managed to grow revenues by nearly 30 percent. A continued bull market and interest in stocks could improve the company’s outlook and give the share price a boost.

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  • Action to take: Shares look oversold here and could be due for a double-digit bounce higher in the weeks and months ahead. Investors may consider shares a reasonable speculation at current prices for a year-end market rally.

    For traders, the February $8 calls are a solid bet, as they’re already slightly in-the-money. They could see high double-digit returns or better as shares come off their quarterly results.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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