Robinhood's bullish diagonal spread strategy targets $675 profit per trade

Robinhood Markets (HOOD) has shown signs of a potential upward move after crossing above its 50-day moving average on Monday. Analysts remain divided on the stock, with a mix of strong buy, hold, and sell ratings. Meanwhile, traders with a bullish outlook are eyeing an advanced options strategy to capitalise on the momentum. A bullish diagonal spread is gaining attention as a way to bet on HOOD’s rise. The strategy involves buying a long-term call while selling a shorter-term, out-of-the-money call against it. This approach benefits from time decay and works best when market volatility is low.

The suggested trade for HOOD is structured at an $85 strike, costing $930 per spread. If successful, the maximum estimated profit reaches $675. However, the trade carries risks, particularly if the stock drops sharply early on. Analyst sentiment on HOOD remains mixed. Out of 24 covering the stock, 15 rate it a Strong Buy, 2 a Moderate Buy, 4 a Hold, and 2 a Strong Sell. Traders using this strategy should set a stop loss at a close below $73 to limit potential losses. A rise in implied volatility could also help, as the position has positive Vega exposure.

The diagonal spread offers a structured way to profit from HOOD’s potential rally, but it requires careful timing and risk management. With the stock above its 50-day average and analyst opinions split, traders will watch closely for further price movements. A close below $73 would signal an exit, while higher volatility could improve the trade’s chances of success.