Robinhood Markets (HOOD) Plummets 6.88%: Prediction Markets Spark Volatility Amid Sector Turbulence

Summary
• Robinhood’s stock tumbles to $107.11, down 6.88% from $115.02
• Prediction markets for NFL/college football expand to 2B contracts traded
• Leveraged ETFs ROBN (-13.56%) and HOOX (-13.89%) mirror sharp decline

Robinhood Markets (HOOD) is under pressure as its stock plunges nearly 7% intraday, trading at $107.11 after opening at $116.30. The selloff coincides with the launch of football prediction markets and a broader tech sector selloff. With turnover at 42.8M shares and a 52-week high of $117.70, the stock faces critical support levels as traders weigh the impact of regulatory scrutiny and market structure risks.

Prediction Markets Expansion Fuels Short-Term Volatility
Robinhood’s announcement of NFL and college football prediction markets has triggered a sharp selloff, as investors reassess the regulatory and operational risks of expanding into sports-related financial products. While the company highlights 2B contracts traded since launch, the move into sports wagers—distinct from traditional betting but still subject to market volatility—has raised concerns about liquidity and pricing mechanisms. The stock’s 6.88% drop reflects a mix of profit-taking after a 400% annual surge and skepticism about the sustainability of its prediction market model.

Capital Markets Sector Mixed as Goldman Sachs (-1.22%) Leads
The Capital Markets sector remains fragmented, with Goldman Sachs (GS) down 1.22% and Robinhood (-6.88%) diverging sharply. While GS navigates macroeconomic uncertainty, HOOD’s decline is tied to its unique exposure to prediction markets and retail trading dynamics. The sector’s 0.64% S&P 500 drag underscores broader risk-off sentiment, but HOOD’s move is more idiosyncratic, driven by product expansion and regulatory tailwinds.

Options and ETFs for Navigating HOOD’s Volatility
• 200-day average: $58.04 (well above current price)
• RSI: 65.05 (neutral, but bearish momentum)
• MACD: 5.08 (bullish) vs. signal line 5.22 (bearish divergence)
• Bollinger Bands: Price at $107.11 near lower band ($97.59–$117.35)

Robinhood’s technicals suggest a bearish near-term bias, with key support at $101.72 and resistance at $102.20. The T-Rex 2X Long HOOD ETF (ROBN) and Defiance Daily Target 2X Long HOOD ETF (HOOX) are down 13.56% and 13.89%, respectively, amplifying downside risk for leveraged players. For options, two contracts stand out:

• HOOD20250829P106 (Put, $106 strike, 8/29 expiry):
- IV: 63.08% (high volatility)
- Leverage: 26.81% (moderate)
- Delta: -0.4317 (sensitive to price swings)
- Theta: -0.0114 (minimal time decay)
- Gamma: 0.0335 (high sensitivity to price changes)
- Turnover: 126,472 (liquid)
- Payoff at 5% downside: $1.90 per contract (max profit if HOOD drops below $106).
This put offers asymmetric upside in a bearish scenario, with high gamma amplifying gains as the stock declines.

• HOOD20250829P105 (Put, $105 strike, 8/29 expiry):
- IV: 63.18% (high)
- Leverage: 30.21% (strong)
- Delta: -0.3981 (moderate sensitivity)
- Theta: -0.0239 (moderate decay)
- Gamma: 0.0328 (high)
- Turnover: 322,240 (very liquid)
- Payoff at 5% downside: $2.15 per contract (max profit if HOOD falls below $105).
This put balances leverage and liquidity, ideal for a mid-term bearish bet with strong gamma to capitalize on volatility.

Action: Aggressive short-sellers should prioritize HOOD20250829P106 for a 5% downside target. Conservative traders may use HOOD20250829P105 as a hedge against further declines.

Backtest Robinhood Markets Stock Performance
The backtest of HOOD's performance after an intraday plunge of at least -7% shows favorable short-to-medium-term gains. The 3-Day win rate is 50.93%, the 10-Day win rate is 52.16%, and the 30-Day win rate is 52.37%, indicating a higher probability of positive returns in the immediate aftermath of such events. The maximum return during the backtest period was 9.46% over 30 days, suggesting that HOOD has the potential for recovery and even gains following significant downturns.

Critical Levels and Sector Signals: What to Watch Now
Robinhood’s 6.88% drop reflects a mix of product expansion risks and broader market jitters. While the stock remains above its 200-day average ($58.04), the RSI at 65 and bearish MACD divergence suggest short-term weakness. Traders should monitor the $101.72 support level and the sector leader Goldman Sachs (GS), which is down 1.22%. A breakdown below $101.72 could trigger a test of the 52-week low ($18.71). For now, HOOD20250829P106 and HOOD20250829P105 offer the best asymmetric risk/reward for bearish positions. Watch for $101.72 support or regulatory clarity to determine the next move.