Robinhood Markets (HOOD) Plunges 2.69% Amid Regulatory Scrutiny and Earnings Pressure

Summary
• Robinhood’s stock tumbles to $116.28, down 2.69% from its 2025 open of $120.25
• Connecticut regulators issue cease-and-desist order over unlicensed gambling allegations
• November trading volumes drop 37% in equity, 28% in options, and 12% in crypto

Robinhood Markets (HOOD) faces a sharp intraday decline as regulatory scrutiny intensifies and operational data reveals a broad slowdown in key trading metrics. The stock’s 2.69% drop to $116.28 reflects investor unease over a 9.1% drop in November and a 22.3% pullback from its 52-week high of $153.86. With the stock trading below its 50-day moving average and a surge in put options activity, the market is pricing in heightened volatility ahead of critical regulatory and operational developments.

Regulatory Headwinds and Operational Slump Weigh on Robinhood
Robinhood’s sharp decline stems from a dual blow: a Connecticut cease-and-desist order over alleged unlicensed online gambling activities and a 37% drop in November equity trading volumes. The state’s Department of Consumer Protection cited Robinhood’s platform for facilitating unregulated betting, prompting analysts at Bank of America and Cantor Fitzgerald to lower price targets. Compounding this, the company reported a 28% decline in options trading and a 12% drop in crypto activity, driven by the removal of 280,000 low-balance accounts. These factors have eroded investor confidence, with the stock now trading 22.3% below its October 6 peak.

Capital Markets Sector Under Pressure as Robinhood Trails Peer Schwab
The Capital Markets sector faces mixed momentum, with Schwab (SCHW) down 1.16% intraday, reflecting broader concerns over retail trading dynamics. Robinhood’s 2.69% drop outpaces Schwab’s decline, highlighting its vulnerability to regulatory and operational risks. While Schwab maintains a more diversified revenue stream, Robinhood’s reliance on payment-for-order-flow and crypto exposure leaves it exposed to sudden shifts in user behavior and regulatory scrutiny.

Options and ETF Plays for Navigating Robinhood’s Volatility
• 200-day MA: $92.52 (well below current price)
• 50-day MA: $122.99 (resistance ahead)
• RSI: 59.13 (neutral but bearish bias)
• MACD: -0.0523 (bearish crossover)
• Bollinger Bands: Price at $116.28 (near lower band at $104.47)

Robinhood’s technical profile suggests a short-term bearish bias, with key support at the 200-day MA and resistance at the 50-day MA. The Direxion Daily HOOD Bull 2X ETF (HODU) offers leveraged exposure but is down 4.81%, reflecting the stock’s weakness. For options, two contracts stand out:

• HOOD20251219P110 (Put): Strike $110, Expiry 12/19, IV 66.80%, Delta -0.225, Theta -0.043, Gamma 0.033, Turnover $935k
- High leverage ratio (94.52%) and moderate delta suggest strong downside potential if the stock breaks below $110.
- Payoff under 5% downside (to $110.22): $0.22 per share.
• HOOD20251219C118 (Call): Strike $118, Expiry 12/19, IV 67.25%, Delta 0.4435, Theta -0.769, Gamma 0.043, Turnover $1.385M
- High liquidity and gamma sensitivity make it ideal for a rebound above $118.
- Payoff under 5% upside (to $122.09): $4.09 per share.

Aggressive bulls may consider HOOD20251219C118 into a bounce above $118, while bears should eye HOOD20251219P110 if the stock breaks below $110.

Backtest Robinhood Markets Stock Performance
The backtest of HOOD's performance after a -3% intraday plunge from 2022 to now shows favorable results, with the 3-Day win rate at 58.50%, the 10-Day win rate at 63.95%, and the 30-Day win rate at 67.76%. The maximum return during the backtest period was 26.94%, with a maximum return day at 59. These figures indicate that HOOD has demonstrated a strong ability to recover from intraday plunges and generate positive returns in the short to medium term.

Robinhood at Crossroads: Watch 50-Day MA and Regulatory Developments
Robinhood’s near-term trajectory hinges on its ability to stabilize trading volumes and address regulatory risks. The stock’s 2.69% drop underscores the market’s skepticism, with the 50-day MA at $122.99 acting as a critical psychological barrier. Investors should monitor the Connecticut cease-and-desist order’s resolution and the company’s December operational data. The sector leader, Schwab (SCHW), down 1.16%, highlights broader capital markets fragility. For now, a breakdown below $110.22 could trigger a test of the 200-day MA at $92.52, while a rebound above $122.99 may reignite bullish momentum. Aggressive traders should prioritize HOOD20251219C118 for a short-term rebound or HOOD20251219P110 for downside protection.