HOOD Option Trade Could Unlock a 49% Annualized Return

Core Viewpoint - Robinhood Markets (HOOD) is transitioning from a trading app to a broader personal finance platform, with stock bouncing off support at the 110 level [1] Option Trade Strategy - The proposed trade involves selling a February 20 put option with a strike price of $105, trading around $5.55, and implementing a bear call spread by selling a call at $140 and buying a call at $145, with respective prices of $2.90 and $2.20 [2] - The total premium generated from the trades is approximately $625, combining the sold put and bear call spread [3] Trade Position and Scenarios - The initial position has a delta of 25, equating to owning 25 shares of HOOD stock, which will change as the trade progresses [4] - If HOOD stock remains between $105 and $140 at expiration, both options will expire worthless, resulting in a total profit of $625 [6] - If HOOD falls below $105, the sold put will be assigned, leading to a net cost basis of $98.75, which is 14.3% below the closing price on Friday [7] - If HOOD rises above $145, the bear call spread will incur a loss of $500, but the overall trade will still yield a profit of $125 due to the premium received [7] Earnings Risk - The trade carries earnings risk as Robinhood Markets is scheduled to report earnings on February 10th [8] Technical Opinion - The Barchart Technical Opinion rating for Robinhood Markets is an 8% Buy, indicating a weak short-term outlook for maintaining the current direction [9]