Robinhood stock price jumps as options trading begins

The stock rose to $85 earlier in the session, nearly double Tuesday’s closing price of $46.80 a share.

It’s a remarkable turnaround for a company that had a disappointing start to trading last week. On the day trading began, Robinhood fell more than 10% over the course of the day before closing below $35 a share.

This week, sentiment around the stock turned. On Wednesday, more than 172 million Robinhood shares changed hands, according to preliminary FactSet data shortly after the session ended, surpassing 102.5 million during the company’s first day of trading. That made Robinhood the second most actively traded stock in the U.S. market, according to Dow Jones Market Data, based on an analysis of companies trading more than $2 on the New York Stock Exchange or Nasdaq.

At the peak of Wednesday’s trading day, the eight-year-old company had a market value of more than $71 billion, even surpassing Intercontinental Exchange Inc.,

ICE -0.02%

which owns the New York Stock Exchange.

On some days, momentum was fueled by individual investors, trading in and out of the stock, hoping to capture big gains during the volatility. Chatter about the stock ticker, HOOD, soared on social media platforms like Reddit’s WallStreetBetsa pattern reminiscent of the meme stock craze earlier this year.

Some users posted screenshots of their positions or bragged about their winnings. Robinhood ranked as the most traded stock on the retail trading platform operated by Fidelity Investments Inc., surpassing companies such as Advanced Micro Devices Inc.

AMD -3.23%

and AMC Entertainment Holdings Inc.

AMC -2.31%

by a wide margin.

Virginia’s Mickey Randhawa decided to sell his approximately 330 Robinhood shares shortly after trading for the first time was halted less than 10 minutes after raising the shares at market opening.

In my head I thought, If it goes up, if it picks up steam, I just have to make a profit now, he said.

Randhawa, who works in information technology, sold his shares for $74.15 each, well above the $57.81 he paid for it, making a profit of more than $5,300, he said. Randhawa, a regular reader of WallStreetBets, said he read a comment Tuesday evening claiming individual investors would continue to push Robinhood higher, perhaps above $70. That prompted him to buy early on Wednesday, he said.

The sharp moves in Robinhoods’ stock price coincided with a rush in options trading on Wednesday. More than 300,000 contracts had been traded that afternoon, according to Cboe Global Markets. Many of these were contracts expiring in just weeks.

Options traders don’t waste time in [Robinhood] as stocks explode, Cboes Henry Schwartz wrote in a note Wednesday.

Options activity indicated that traders were placing wide bets on Robinhood stock. Options allow traders to hedge their portfolios or make targeted bets on individual companies and broader indices. Call options give investors the right to later buy shares at a specified price. Puts give the right to sell.

The most popular options were conversations tied to the stocks that moved through the day, data from Cboe shows. These were linked to a so-called $70 strike, well above where the stock started the day.

In general, however, put options were slightly faster than call options that switched hands. Other popular options contracts included puts tied to the stock that plummeted to $20 or $30.

Brian Cash of Oklahoma bought five $20 put options shortly after Robinhood peaked this morning.

It was grossly overvalued in my opinion, so when I saw they had the puts, I bought them ASAP, he said.

mr. Cash moved his investments from Robinhood to Fidelity earlier this year after Robinhood restricted trading in several popular stocks.

Options have become a hallmark of the meme mania this year, with individual investors piling up in betting on companies like AMC Entertainment Holdings and GameStop Corp. in an effort to boost their investments.

Options allow traders to put down a relatively small sum of money in exchange for potentially explosive returns if their bets are correct. They can be risky and potentially cause large losses for investors.

Many analysts say that options themselves help drive stock swings, as hedging activities by professional traders can exacerbate up and down movements in stocks.

Write to Caitlin McCabe at [email protected], Orla McCaffrey at [email protected], and Gunjan Banerji at [email protected]