Robinhood Markets stock has had a stellar performance in 2025, and the chart continues to look strong.
The price of the online trading platform is up 289% so far in 2025, and there's a way to bet that the stock will remain strong between now and early next year.
Robinhood Long-Term Bull Put Spread
When it comes to options, we normally look at short-term trades. Anywhere from one week to one month. Now, we will look at a longer-term bull put spread.
Longer-term option trades tend to move a little slower than shorter-term trades. That allows more time to adjust or close, but also means a lower annualized return.
As a reminder, a bull put spread is a defined risk strategy, so you always know the worst-case scenario in advance. This type of trade will profit if Robinhood stock trades sideways or higher and even sometimes if it trades slightly lower.
Potential Premium
With Robinhood stock trading around 145, if we use the March 20 expiration, we can sell a 110 put and buy a 105 to set up the bull put spread. That spread is trading around $1.40.
Selling this spread would generate roughly $140 in premium with a maximum risk of $360.
If the spread expires worthless that would be a 38.9% return in five months provided Robinhood stock is above 110 at expiration. That seems like a pretty reasonable bet to me.
The 110 strike put has a delta of 20, which means it has a roughly 80% chance of expiring worthless.
The maximum loss would occur if Robinhood stock closes below 105 on March 21 which would see the premium seller lose $360 on the trade.
The break-even point for the trade is 108.60, which is calculated as 110 less the $1.40 option premium per contract.
It's ideal to set up an adjustment point or a stop loss if Robinhood drops below 120. Otherwise, another good rule of thumb is to limit the loss to the amount of premium received which in this case means you would unwind if the spread started trading around 2.80.
Also, sticking to this stop loss level will help avoid large losses if the trade goes south.
Robinhood's Ratings At IBD
Currently, Investor's Business Daily gives Robinhood stock a Composite Rating of 98 out of a best-possible 99, an Earnings Per Share Rating of 80, and a Relative Strength Rating of 98. According to IBD Stock Checkup, Robinhood ranks first in its group.
Please remember that options are risky, and investors can lose 100% of their investment.
This article is for education purposes only and not a trade recommendation. Remember to always do your due diligence and consult your financial adviser before making any investment decisions.
Gavin McMaster has a masters in applied finance and investment. He specializes in income trading using options, and is conservative in his style. He also believes patience in waiting for the best setups is the key to successful trading. Follow him on X/Twitter at @OptiontradinIQ.
