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Today's editorial pick for you
Why You Should Go for Robinhood (HOOD) Stock's Fourth-Down Conversion
Posted On Jan 05, 2026 by Joshua Enomoto
One of the underappreciated ironies in options trading is that once you have developed a reliable, probabilistic system, your strategy should become less optimized for outright statistical success and more aligned with raising expected value. Case in point is Robinhood Markets (NASDAQ:HOOD), a popular financial services specialist. Right now, market makers are offering far out-the-money (OTM) debit call spreads on HOOD stock that don't seem probabilistically reasonable…until you dig under the hood.
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At first glance, it might seem strange not to go for the most probabilistically reliable trade. For example, if you had good reason to believe that HOOD stock will reach $120 over the next 10 weeks, your first instinct wouldn't be to push the needle to $135. After all, if HOOD stock never gets to that point, or anywhere close, you end up losing the entire debit paid for the trade.
However, the calculus can easily change if there is a reasonable possibility of HOOD stock hitting $135 in the required time and if the payout for fully triggering this lofty strike is appropriately large. At that point, you may be incentivized to go for it.
To use a sports analogy, consider a bases-loaded situation. If you're just interested in winning this one game, you might go for a clean hit or even a sacrifice fly. However, if your objective is to make a deep run in the playoffs, you can't always be taking the conservative route. If you have a tendency to let your opponent stick around, you'll end up losing a bunch of tight games that you could have won with a more optimal, selectively aggressive strategy.
With that in mind, let's take a look at the opportunity we have with HOOD stock, starting with a discussion on risk topography.
What is Risk Topography in the Stock Market
At its foundation, risk topography represents a three-dimensional framework for understanding demand structure, incorporating expected (terminal) price, probability density and population frequency. Put simply, risk topography is a visual way to address the core questions traders constantly wrestle with: how far can a stock move, how likely is that move, and how crowded is the trade?
To make this intuitive, imagine you're the head coach of a professional football team. From the outside, most fans only focus on the scoreboard — wins and losses. While those outcomes obviously matter to you as well, your real responsibility lies in managing the process that leads to winning: preparation, situational awareness, analytics and tactical decision-making.
At the most basic level, games are won by scoring more points than the opponent. However, time is limited, and resources are finite. Players can't operate at maximum intensity indefinitely without fatigue or injury. As a result, success depends on extracting maximum value from the moments when your team has possession and leverage.
This reality creates an important strategic tension. When genuine opportunities present themselves, the objective should be to pursue touchdowns rather than defaulting to field goals. A classic example is the fourth-down decision. Attempting a conversion often carries a lower raw probability than kicking, depending on field position. But the expected value of the aggressive choice can be meaningfully higher.
If a team consistently settles for field goals in situations where touchdowns were realistically attainable, it risks falling behind over the course of the game — particularly if the opposing team capitalizes on momentum shifts. Touchdowns compound scoring advantages and unlock the full upside of an offense.
That said, aggression without context is reckless. You don't go for it blindly — and this is precisely where risk topography becomes relevant. By understanding how stock activity moves through different price regions over a defined period, traders can assess whether the environment justifies pressing for higher payoff outcomes — or whether discipline and restraint are warranted.
Plotting a Trade for HOOD Stock
Drilling into HOOD stock, a hierarchical analysis of its historical price data since the company's public market debut reveals that, on any given 10-week period, the expected outcome would range between $111 and $132 (assuming an anchor price of $115.21, Friday's close). Moreover, probability density would peak at around $119, indicating an upward bias.
However, we're not interested in trading the aggregate performance of HOOD stock. Instead, we're seeking to isolate the statistical response to the current quantitative signal. In the past 10 weeks, HOOD printed only four up weeks, leading to an overall downward slope. Under this setup, the forward 10-week returns would be expected to land between $105 and $150, thus demonstrating significant potential dispersion.
To be fair, probability density would likely peak at around $121, which is not that much different from the expected peak density under aggregate conditions. However, density is relatively robust between $115 and $135. In other words, the chance that HOOD stock will end up where it currently stands over the next 10 weeks is about the same as the security reaching $135.
Let's stop right there for a moment because this unusual dynamic represents a structural advantage for retail traders. Wall Street market makers generally price risk monotonically, meaning that risk rises in proportion to the forward strike price's distance from spot. Under monotonic models (such as Black-Scholes), you would expect the probability of profit of the $135 strike to be significantly lower than the $115 strike.
However, under the quantitative, hierarchical model, the probability density for these two disparate strikes is effectively identical. As such, you are heavily incentivized to consider going for the fourth-down conversion attempt, to extend the football analogy.
What's more, risk topography shows projected heightened activity between the $130 and $135 strike prices. Given that traders may be active in this zone, it's not unreasonable to believe that HOOD stock — under the right circumstances — could terminate at $135.
Granted, the data points to $121 being the most likely terminal value at the end of the next 10 weeks. However, my point is that, using risk topography, the hard numbers arguably justify an aggressive wager.
Going for the Big Win
Acknowledging that we're targeting maximal expected value, I believe the 130/135 bull call spread expiring Feb. 20, 2026, fits the bill. By putting $120 at risk, you would be betting that HOOD stock rises through the $135 strike at expiration. If it does, the maximum profit would be $380, a payout of about 317%.
Yes, you can go for the 115/120 bull spread, also expiring February 20. In this case, the required debit would be $240, with a chance to earn only $260, a payout of a little over 108%. With the original 130/135 spread, you're putting less money at risk and getting a much bigger payout.
Not only that, you can see that by winning a couple of these big trades, you may be better positioned to be profitable over the long run. This is why optimizing for smart, calculated risks can outperform probability-maximizing strategies over time.
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