Robinhood taking the markets for a ride

Robinhood is most known for fueling the growth of so-called meme stocks like GameStop and AMC, which soared earlier this year not because of economic fundamentals, but because people on social media thought them humorous.

Investors wondered, well before it went public last week, if Robinhood would become a meme stock.

So far, it looks that the answer is yes. Robinhood’s stock has risen 100 percent this week, including a 50 percent increase yesterday, after suffering a fall on its first day of trade. The stock had to be halted many times yesterday morning for Wall Street to recover its breath due to the frantic trading.

Are retail investors to blame for the uptick?

The answer looks to be yes for the second time in this narrative. Here’s some proof:

On Tuesday, Robinhood’s total retail volume surged by almost tenfold over the previous day.
The most popular stock on Reddit’s WallStreetBets community was Robinhood, which was also happened to be the Fidelity’s most traded stock.
Robinhood’s buy orders have roughly doubled those of AMC, another meme stock.
Another factor: Traders may begin placing options on Robinhood’s shares this week, allowing investors to bet on whether a stock would rise or fall rather than purchasing actual stock. Meme stock frenzy has been associated with increased options activity, which represented for 46% of Robinhood’s income in 2020.

It’s possible that there’s a method to the insanity: Cathie Wood’s investment firm, ARK Invest, increased its holding in Robinhood on Tuesday. ARK Invest has made optimistic bets on Tesla and other high-growth digital firms. Retail traders may be following cues from Cathie, their stock oracle, according to analysts.

In the end, individual traders will determine whether Robinhood succeeds or fails.

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