Robinhood (HOOD) is exactly the type of underlying asset where it makes more sense to sell volatility than to predict the next headline-driven price move. This is especially true if implied volatility is still rising after a sharp pullback. A short strangle (selling an out-of-the-money put and an out-of-the-money call with the same expiration) is essentially a bet that the stock price will remain within a wide range until expiration, and since the implied volatility is more expensive than what the stock price ultimately realizes, the combination of time decay and IV regression to the mean can be a tailwind. After the market reversal in early October 2025, crypto/options trading activity cooled significantly, and Robinhood’s fourth quarter results reflect that slowdown. This is important because HOOD continues to be operationally exploited by “animal spirits.” When a cryptocurrency is growing rapidly, volume can spike and the gap in stock prices can widen. When cryptocurrencies cool down, the opposite happens. There is also some evidence that cost discipline is loosening a bit. Operating expenses for the fourth quarter increased significantly from the prior year period, from $458 million for the quarter ended December 31, 2024 to $633 million for the quarter ended December 31, 2025. Robinhood is most likely to maintain its status as a “financial super app” and appears to be choosing to continue investing through the cycle. Despite the cooling in crypto, retail trading strength in other areas remained strong, with trade-based revenues supported by strong activity in stocks and options. Robinhood reported record net deposits for 2025, including a large contribution in the fourth quarter, and also disclosed preliminary net deposits for January 2026, which were up year-over-year, although perhaps a little less predictable. Despite rapid growth, the total addressable market is still substantial compared to Robinhood’s market share. Robinhood not only has a smaller share of U.S. retail investable assets than its larger peers, but it also has strong momentum as it continues to acclimate younger users to more of its products as their wealth grows. In other words, despite the current weakness in cryptocurrencies, the company can still steadily increase its business with next-generation users. HOOD is already pricing in significant disappointment, having fallen ~52% from its early October 2025 high, which is even greater than Bitcoin’s ~45.5% decline over the same period. This is one of the reasons why IV increases. It’s also likely that investors are waiting for clearer data. The company is scheduled to announce its first quarter 2026 earnings on April 30th. Strangle selling generally comes down to structure and exit rather than specific predictions, seeks to exploit relatively wide ranges, avoids short-term catalysts, and is done by balancing theta (option decay rate), breakeven, and “gamma.” Options that are close to expiry have very high theta, which is advantageous for squeeze sellers, but they tend to have narrow break-even points and gamma, which is not very advantageous. So, you should use expiration dates where theta makes sense, but there is still time to adjust. An expiry of 30 days or more would solve the break-even point, but the expiry should be shorter than the next expected revenue in late April. Also, when selling Stranglade, look for opportunities to close short options early once stock price declines and volatility begin to take effect. Monitor the remaining yield and consider simple rules. For example, if a short option loses 80% of its value, roll or take profit. In the strangling example below, in the worst case, you could go long HOOD at a 26% discount to the current stock price at expiration, or go short at a 37% premium at expiration (excluding the $4.30 premium collected). However, as mentioned above, the position will probably be closed or adjusted well before that. Disclosure: None. All opinions expressed by CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, its parent or affiliates, and may have been previously disseminated on television, radio, the Internet, or another medium. The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect your unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
