Robinhood (HOOD) Plunges 8.5%: What's Fueling the Selloff?

Summary
• Robinhood Markets (HOOD) slumps 8.5% intraday to $124.11, its lowest since October 2025.
• November trading volumes fell 37% in equities, 28% in options, and 12% in crypto.
• Connecticut regulators issued a cease-and-desist order over alleged unlicensed gambling operations.
• The stock’s 52-week high of $153.86 remains 18.6% above current levels.

Robinhood’s shares are in freefall after a deluge of negative catalysts: weak November operating data, regulatory scrutiny, and analyst downgrades. The stock’s 8.5% drop—a stark reversal from its 215% YTD rally—has triggered a surge in put options and leveraged ETFs. With the company’s Indonesian expansion plans still pending, investors are left weighing short-term pain against long-term potential.

Weak November Metrics and Regulatory Scrutiny Trigger Sharp Selloff
Robinhood’s collapse stems from a perfect storm of declining user engagement and regulatory headwinds. November trading volumes plummeted 37% in equities and 28% in options, while crypto volumes fell 12%. The removal of 280,000 low-balance accounts further eroded funded customer counts. Compounding the issue, Connecticut’s Department of Consumer Protection issued a cease-and-desist order over alleged unlicensed gambling operations. Analysts at Bank of America and Cantor Fitzgerald slashed price targets, citing the “notable m/m decline in trading volumes” as a red flag for transaction-based revenue models. The stock’s volatility—60 moves of over 5% in the past year—suggests the market views this as a meaningful but not terminal setback.

Broker-Dealers Sector Mixed as Schwab Rises Amid Robinhood's Slide
While Robinhood tumbles, the broader broker-dealers sector shows resilience. Charles Schwab (SCHW), the sector leader, rose 0.98% on strong Q3 self-directed 401(k) balances and record highs in equity allocations. Schwab’s focus on institutional-grade custody and robo-advisory services contrasts with Robinhood’s retail-centric model, which faces margin pressure from declining crypto and options volumes. Bluespring Wealth Partners’ $6B in 2025 RIA acquisitions also highlight the sector’s shift toward fee-based wealth management, a stark contrast to Robinhood’s transaction-driven approach.

Options and ETF Strategies for Navigating HOOD's Volatility
• MACD: 1.48 (bullish divergence), Signal Line: -0.71 (bearish crossover), RSI: 63.74 (neutral), Bollinger Bands: 143.89 (upper), 124.29 (middle), 104.69 (lower).
• 200D MA: 91.80 (far below current price), 30D MA: 128.90 (resistance ahead).
• Key Levels: 124.29 (middle BB), 135.63 (30D support), 105.14 (200D support).

Top Options Picks:
• HOOD20251219P120 (Put, $120 strike, 12/19 expiry):
- IV: 59.28% (moderate), Leverage Ratio: 45.45% (high), Delta: -0.338 (moderate sensitivity), Theta: -0.0296 (slow decay), Gamma: 0.0317 (high sensitivity).
- Payoff: At 5% downside (118.0), intrinsic value = $2.00. Turnover: 1.1M (liquid).
- Why: High leverage and gamma make this put ideal for a 5% drop scenario, with strong liquidity for entry/exit.
• HOOD20251219P122 (Put, $122 strike, 12/19 expiry):
- IV: 59.37% (moderate), Leverage Ratio: 34.95% (high), Delta: -0.405 (high sensitivity), Theta: -0.0021 (minimal decay), Gamma: 0.0335 (very high sensitivity).
- Payoff: At 5% downside (118.0), intrinsic value = $4.00. Turnover: 203K (liquid).
- Why: Strong delta and gamma amplify gains in a bearish move, with minimal time decay until expiry.

ETF Angle: The Direxion Daily HOOD Bull 2X ETF (HODU) plunged 17.87%, reflecting leveraged bearish sentiment. Aggressive short-sellers may pair HODU with the above puts for a dual play on volatility. If $124.29 breaks, HOOD20251219P120 offers short-side potential.

Backtest Robinhood Markets Stock Performance
The performance of HOOD (ETRADE) after a -9% intraday plunge from 2022 to now has shown positive returns, with the 3-Day win rate at 59.07%, the 10-Day win rate at 64.67%, and the 30-Day win rate at 69.03%. The maximum return during the backtest period was 27.19% over 30 days, indicating that HOOD has generally recovered from the intraday plunge and delivered positive returns in various time frames.

Act Now: HOOD's Volatility Presents Strategic Entry Points
Robinhood’s selloff is a high-risk, high-reward scenario. While near-term catalysts like the Indonesian expansion and YES/NO event on Dec. 16 could stabilize the stock, the 52-week high remains 18.6% out of reach. Investors should monitor the 124.29 (middle BB) and 105.14 (200D MA) levels for directional clues. The sector leader, Charles Schwab (SCHW), rose 0.98%, underscoring the divergence in business models. For those with a contrarian edge, the puts highlighted above offer leveraged exposure to a potential rebound. Watch for $124.29 breakdown or regulatory reaction.