Robinhood shares surge nearly 82% as retail investors dive in

Shares of Robinhood Markets Inc soared almost 82 percent on Wednesday before paring gains, helped by a surge of interest from retail traders who have piled into the stock after its underwhelming markets debut last week. The online brokerage’s shares were last up 34.0 percent at USD 62.73 compared with the session high of USD 85.

The stock has risen far above its initial public offering price of USD 38 per share, putting it on track for a fourth straight day of gains and giving it a market capitalization of around USD 50 billion. Interest in the stock among retail investors has soared despite its underwhelming market debut last week when it fell below its IPO price.

Robinhood was by far the most mentioned stock over the past 24 hours on WallStreetBets, the Reddit platform at the center of this year's "meme stock" rally, according to sentiment tracker SwaggyStocks. Retail trading volume rose tenfold on Tuesday, helping the stock gain 24 percent, according to Vanda Research.

"We know from meme stock trading that's happened over the last several months that when there's a lot of activity on social media, sometimes that will drive a stock higher or lower,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

Wednesday also marked the first day that investors could trade options on Robinhood shares, offering them another way of betting on the stock. Options trades by retail investors have contributed to outsize moves in the shares of companies like GameStop and AMC Entertainment Holdings in recent months.

Nearly 100,000 contracts changed hands in the first hour of trading, with volume in Puts outpacing calls 1.5-to-1, according to Trade Alert data. Contracts betting on the shares rising above USD 70 by August 20, was the most actively traded contract. Puts that come into play if the stocks falls below USD 20 by mid-August were the next most actively traded contract.

Sentiment on Robinhood has also been helped by star stock picker Cathie Wood, who heads the ARK Invest asset management firm. Wood's Ark Fintech Innovation ETF bought another 89,622 shares of Robinhood on Tuesday, and the stock now amounts to about 0.9 percent of its portfolio, according to a summary of the fund's daily trading.

Overall, Wood's flagship ARK Innovation ETF has accumulated nearly 5 million Robinhood shares, worth about USD 229 million. "People are trying to jump on the back of Cathie Wood's vote of confidence in Robinhood shares," said Thomas Hayes, managing member at Great Hill Capital in New York. "The catalyst was certainly Cathie Wood putting in a sizable position after everyone was downbeat after the IPO."