Robinhood (HOOD) Might Be a UFO!
Don’t worry! The arrow through the head is an old gag, I got it from the same prop shop as my human disguise…I mean… my fashionable glasses!
Today I’ll be discussing Robinhood, the brokerage. I’ve traded this one many times in the past, especially when it seemed like it was undervalued. But it’s risen quite a bit since then! But before I get to that possible UFO…
What’s the Word on the Street?
As of me writing this, the market is mostly positive except for the Nasdaq. It hit a fresh record high yesterday, so it’s allowed to take a breather.
There isn’t much else to say, we’re in a bit of a wait and see period at the moment. Like I mentioned yesterday, there aren’t any new, major data releases this week. Earnings are what matter right now. And whatever is happening with tariffs/trade deals.
Robinhood Markets (HOOD)
What Is It?
Robinhood Markets, Inc is a financial services platform, which engages in the provision of retail brokerage and offers trading in U.S. listed stocks and Exchange Traded Funds, related options, and cryptocurrency trading, as well as cash management, which includes debit cards services. The company was founded by Vladimir Tenev and Baiju Prafulkumar Bhatt in 2013 and is headquartered in Menlo Park, CA. The listed name for HOOD is Robinhood Markets, Inc. Class A Common Stock.
Why Is It a Possible UFO?
Primarily its current share price relative to its fair value, what other option traders expect, and its volatility are the reasons HOOD could be a UFO.
What About Recent News?
HOOD has been on a tear this year as crypto prices have risen in tandem. But Robinhood does a lot more than just crypto! Over the years its expanded its offerings to include retirement amounts and more data and insights for traders like me (and you?).
It took a little hit recently when it was passed over to join the S&P index, but that only benefits traders for the moment because that’s merely an eventuality (or so I think).
What’s the Current Price?
I know, HOOD has gone up so much already this year. Most of those gains were just in the past 3 months. But there are still some compelling reasons why it might be a good trade.
What’s the Fair Value?
I’d first like to emphasize that fair value is subjective. Many analysts at many banks and institutions rate stocks differently and assign fair value in their own unique way. So, what I like to do is take all the recent fair values since the most recent earnings report and average them. In this case…
Since HOOD’s most recent earnings report on 04/30/2025, it has received 24 ratings and taking the average, the fair value might be somewhere around: $81.75. 19 ratings are a buy, 4 are a hold, and 1 is a sell. The lowest price target is $43, while the highest is $125.
This average fair value is below the current price (~$102.50), but a lot of the earlier price targets skewed the average down quite a bit. If I use the more recent ratings from this month, there are 8 of them and the average is $107.50. 6 ratings are a buy and 2 are a hold. The lowest price target is $99, while the highest is $125.
What Do Options Traders Think?
Calls are trading over equidistant puts, which means traders think there is a chance to the upside. You can see because… forget about the green columns and focus on the red. Notice how on the right side for the $100 put it says $7.40, it’s $8.05 for the equidistant call at $105.
The premium (the credit you receive for executing the trade) is currently less for selling puts, as opposed to selling calls. Basically because of that, option traders expect the stock to go up, rather than down.
How About Volatility?
The IV rank (the purple line) for HOOD (stock price in blue) is currently hovering around 33.78, which is somewhat elevated. This makes short strategies (which are what I prefer) more attractive.
What’s the Trade?
My preferred trade is a variation of the wheel without the rolling, AKA cash-secured puts. I typically like to target stocks that offer a dividend and are below fair value.
Why a dividend? If the trade results in assignment and I’m on the hook for X amount of shares, I can at least be satisfied knowing I picked a (hopefully under fair value) company that will pay me a small amount while I run the other side of the trade AKA covered calls.
It’s a fairly low-risk strategy (all options trading is risky!), that has a higher probability of success, but requires a higher amount of collateral.
HOOD does not offer a dividend unfortunately, but that’s not a dealbreaker!
So if you saw the most recent image above, I already STO (sold to open) 1 contract of the $80 put for the August 29th expiration earlier this morning. I like to have a DTE (Days To Expiration) that is around ~45 days.
When the trade reaches 50% profit I will buy it back. I don’t like to be greedy and go for more profit, because I would rather not waste my time being in a trade for too long.
What About Alternative Trade Ideas?
- If the collateral requirement is too high, another idea is a put credit spread. You would sell a put at a strike below the current share price and then buy a put at a lower strike than the put you sold. By doing so, you will avoid the collateral requirement of a cash-secured put, but the credit received will be smaller. Also, if the trade goes sideways, you will not be assigned shares so no collecting dividends and running covered calls afterwards.
- Just invest! 1 share or even fractional shares are a way to get a foothold in a stock that you think might increase in value.
Wait…Where Are the Candlesticks? And All the Other Indicators?
I know many traders love their candlesticks and a ton of indicators. I prefer simplicity. Candlesticks aren’t necessary unless you’re the kind of trader that wants to try and pick the perfect moment to execute a trade, and even then it’s not a sure thing.
As for indicators, there are a ton. Some of them work sometimes. None are perfect. I don’t want to get bogged down with too many. You’ll drive yourself crazy looking at too many of them, so find a handful you like and stick with those.
Disclosure
- I currently have open trades with HOOD (as mentioned in this post).
- No trade is a sure thing. There is always risk involved.
- This blog post is not meant to take the place of financial advice, but hopefully acts as a guide for learning or informational purposes.