Roblox Plummets 7.3% Amid Legal Storm and Investor Exodus: What's Fueling the Selloff?

Summary
• Roblox (RBLX) plunges 7.33% intraday to $123.705, its lowest since March 2025
• Louisiana AG sues over child safety protocols, sparking 50,000+ petition signatures against CEO
• Institutional buyers add $70M stake while insiders offload $38M in stock

Roblox faces a perfect storm of legal scrutiny, regulatory backlash, and investor skepticism as its stock collapses on extended trading. The platform’s recent child safety controversies, coupled with insider selling and a surge in lawsuits, have triggered a sharp selloff. With the stock trading below its 52-week low and a $148.32 fair value gap, the market is pricing in existential risks to its growth narrative.

Legal Reckoning and Child Safety Scrutiny Trigger RBLX's Sharp Decline
Roblox’s 7.3% intraday drop is directly tied to the Louisiana Attorney General’s lawsuit alleging the platform enables predatory behavior through inadequate safety measures. The company’s decision to ban 'vigilante' users exposing predators has sparked public outrage, with social media trending hashtags demanding CEO removal. Over 300 lawsuits now target Roblox, including a Michigan mother whose daughter was allegedly kidnapped via the platform. This legal firestorm has eroded investor confidence, compounded by insider selling of $38M in shares and a 9% single-day drop earlier this week. The stock’s collapse reflects fears of regulatory intervention, reputational damage, and potential liability costs.

Options Volatility and Technical Divergence: Strategic Plays for RBLX's Turbulent Outlook
• 200-day MA: $87.89 (well below current price)
• RSI: 50.3 (neutral but bearish bias)
• MACD: 2.47 (bullish) vs. Signal Line: 2.91 (bearish divergence)
• Bollinger Bands: $127.80 (lower) vs. $140.52 (upper), with price near lower band

Roblox’s technicals show a bearish divergence between MACD and price, with RSI hovering near neutral territory. The stock is testing its 200-day MA as support, but the 52-week low at $37.50 remains a distant concern. For aggressive short-term plays, two options stand out:

• RBLX20251010P118 (Put Option):
- Strike: $118, Expiry: 2025-10-10
- IV: 53.79% (moderate), Leverage: 69.56%, Delta: -0.2797, Theta: -0.0206, Gamma: 0.0343, Turnover: 169,823
- IV: Indicates moderate volatility expectations
- Leverage: High potential for price swings
- Delta: Sensitive to moderate price drops
- Theta: Low time decay, ideal for short-term holds
- Gamma: High sensitivity to price movement
- Turnover: High liquidity for entry/exit
- Payoff at 5% downside: $5.605 (max(0, 118 - 117.5195))
- This put offers a high leverage ratio and strong gamma, making it ideal for a 5% bearish move.

• RBLX20251010P119 (Put Option):
- Strike: $119, Expiry: 2025-10-10
- IV: 52.31% (moderate), Leverage: 61.56%, Delta: -0.3124, Theta: -0.0036, Gamma: 0.0371, Turnover: 39,296
- IV: Suggests balanced volatility expectations
- Leverage: Strong upside potential for price drops
- Delta: More sensitive to price declines than RBLX20251010P118
- Theta: Minimal time decay, suitable for short-term plays
- Gamma: High responsiveness to price swings
- Turnover: Sufficient liquidity for trading
- Payoff at 5% downside: $5.605 (max(0, 119 - 117.5195))
- This put’s higher delta and moderate IV make it a robust play for a 5% bearish scenario.

Trading Setup: Key support at $120 (lower Bollinger Band) and $115 (psychological level). A break below $120 could trigger a test of the 200-day MA at $87.89. Aggressive bulls may consider RBLX20251010C120 (Call Option) if the stock bounces above $127.80 (upper Bollinger Band).

Backtest Roblox Stock Performance
Below is an interactive event-backtest panel that summarises how Roblox (RBLX.N) typically trades after suffering an intraday plunge of 7 %-plus (2022-01-01 ⟶ 2025-10-03, close-to-close basis). Open it to explore win-rates, cumulative excess returns and the detailed 30-day post-event path.Key takeaways (30-day horizon):• Average excess return after a plunge is +6.7 % versus the benchmark’s +4.3 %. • Win-rate gradually improves to ~61 % by day-30. • Short-term (1-3 days) edge is weak; most of the out-performance accrues from day-10 onwards.Feel free to drill down further or ask for different event thresholds / holding windows.

Act Now: RBLX at Crossroads – Legal Risks vs. Analyst Optimism
Roblox’s 7.3% drop reflects a market pricing in existential risks from its child safety controversies and regulatory scrutiny. While analysts like Wells Fargo ($155 target) and BMO ($160) remain bullish, the stock’s technicals and legal headwinds suggest volatility will persist. Watch for a breakdown below $120 to confirm bearish momentum or a rebound above $127.80 to reinvigorate the $148.32 fair value narrative. Sector leader Electronic Arts (EA) trades flat (-0.1%) as investors weigh RBLX’s unique risks against broader gaming trends. Watch for $120 support or regulatory reaction.