Robinhood shares surge in frenzied trading

The stock has risen far above its IPO price of US$38 per share

Robinhood’s shares finished at US$70.39, after reaching a session high of US$85 when the stock was nearly 82 per cent higher, with one analyst dubbing it "the meme of memes" in a reference to stocks popularised this year by retail investors congregating in online platforms.

The stock has risen far above its initial public offering (IPO) price of US$38 per share and has gained for a fourth day in a row.

Its market capitalisation rose to US$58.8 billion, catapulting it ahead of Twitter, restaurant chain Chipotle Mexican Grill and asset manager T. Rowe Price.

Interest in the stock among retail investors soared on social media despite its weak market debut last week, when it fell below its IPO price. Though, it was unclear exactly how much of Wednesday's buying was from retail investors.

On Tuesday, retail trading volume rose tenfold, helping the stock gain 24 per cent, according to Vanda Research. Over the past 24 hours, Robinhood was by far the most mentioned stock on WallStreetBets, according to sentiment tracker SwaggyStocks.

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 Mr Randy Frederick, vice-president of trading and derivatives for Charles Schwab in Austin, Texas.

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

Around 293,000 contracts changed hands by 1915 GMT, about evenly spread between bearish puts and bullish calls, putting it on pace for one of the most active options markets debuts ever, according to Trade Alert data.

I am surprised by how active it is... but then this is the meme of memes, said the head of product intelligence at Cboe, Mr Henry Schwartz.

Contracts betting on the shares rising above US$70 by Aug 20 were the most actively traded. Puts that come into play if the stocks falls below US$20 by the middle of this month were the next most actively traded contract.

Implied volatility on the stock's August options stood at around 240 per cent - indicating that traders expect the stock to move about 15 per cent every day, with a greater-than-30 per cent daily move once every 20 days, according to a note from Christopher Murphy of Susquehanna Investment Group.