Unusual Options Activity: Robinhood Markets (HOOD)

Shares of brokerage firm Robinhood Markets (HOOD) have been trending down since shortly after the company went public earlier in the year. One trader, however, sees the possibility for a rebound from here.

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  • That’s based on the May $55 calls. With 177 days left on the trade, 3,710 contracts traded against an open interest of 129, for a 29-fold jump in volume. The buyer of the calls paid $1.64 to make the trade.

    The stock last went for around $29 per share, right at an all-time low for shares compared to a high of $85. The strike price of $55 would require a 90 percent jump higher in shares from here.

    • This Company’s Share Price has Increased 1650% Since 2016.

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    Robinhood recently reported earnings, and investor discovered that the company’s reliance on cryptocurrency revenue is a big deal.

    Action to take: While revenue is up 35 percent over the past year, the volatility in the crypto space could lead to further declines in shares before a move higher. It’s also unlikely that the company will be moving to profitability anytime soon until it can figure out how to better smooth over earnings.

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  • Traders could luck out with these May calls, as shares are a bit oversold in the short-term. Longer-term, the company has some bigger issues to work through, and traders should use any rally as an excuse to take a short position instead. The May $20 puts, last going for about $1.65, could be a better trade here for a quick mid double-digit return.

     

    Disclosure: The author of this article has no position in the company mentioned here, and does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.