Online brokerage firm Robinhood Markets (HOOD) has been on a tear, with shares up over 350% in the past year. Shares recently declined on an analyst downgrade, but one trader sees the stock soaring higher.
That’s based on the June $100 calls. With 84 days until expiration, 3,902 contracts traded compared to a prior open interest of 127, for a 31-fold rise in volume on the trade. The buyer of the calls paid $0.85 to make the bullish bet.
Robinhood shares last traded in the low-$60 range, so the stock would need to rally by about $40, or 66%, for the options to move in-the-money. The strike price is significantly above Robinhood’s 52-week high of $66.91.
In addition to a soaring share price, Robinhood has been firing on all cylinders recently. Revenues jumped 115% over the past year amid rising trading revenue. And earnings growth soared a massive 2,950%. And profit margins topped 40%, making for a great play for momentum investors in the past year.
Action to take: With Robinhood on a growth streak, short-term pullbacks in shares should likely be bought by aggressive investors and traders. Momentum investors can probably see shares rise higher over the coming weeks.
For traders, the June $100 calls are aggressive, but inexpensive enough to see triple-digit returns if shares rally back quickly in the weeks ahead.
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 company mentioned in this article.