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Robinhood Stock Tumbles as Investors Seek Exit; Jim Cramer Says Options Market Key

TheStreet's founder, Jim Cramer, says Robinhood traders need to focus on "busters" in the options markets as investors move to exit from last week's IPO.

Robinhood  (HOOD) - Get Robinhood Report shares were marked sharply lower in pre-market trading Thursday as the online trading platform continues to whipsaw amid intense retail investor interest and last week's disappointing Nasdaq IPO.

Papers lodged with the U.S. Securities and Exchange Commission also indicated that several early investors, including Andreessen Affiliates and New Enterprise Associates, had filed for permission to sell around 100 million shares in the Menlo Park, California-based company. 

Robinhood shares hit an intra-day high of $85 each in early trading yesterday -- before being briefly suspended by officials on the Nasdaq -- amid an astonishing surge in options volumes on the first day of trading for contracts liked to the online platform. More than 290,000 contracts changed hands Wednesday, with target prices of between $70 on the upside and $20 on the downside. 

Interest in the stock was also piqued by reports that Cathie Wood's, ARK Innovation ETF  (ARKK) - Get ARK Innovation ETF Report has added another 90,000 shares to take her total position in the group to about 5 million.   

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Robinhood shares were marked 11.5% lower in early Thursday trading to change hands at $62.70 each. The shares closed at $70.39 each last night to peg the group's market value at $58.82 billion.

Robinhood listed on the Nasdaq last Thursday with the sale of 55 million shares at $38 each. The IPO raised $2.1 billion and valued the group at around $32 billion prior to the start of its trading debut.

Shares fell 8.4% in their first trading session, however, to close at just under $35 each just hours it revealed it's facing a joint FINRA/Securities and Exchange Commission investigation into whether its employees traded shares in fast-moving meme stocks such as GameStop  (GME) - Get GameStop Corp. Class A Report prior to imposing controversial restrictions on customers in late January

Data from the Yolosocks.live website, which tracks real-time mentions on stocks within Reddit's r/wallstreetbets chatroom, indicates that Robinhood is the second most- discussed stocks among users over the past 24 hours, just behind GameStop.

Robinhood said it generated $959 million in revenues last year, a 245% increase from 2019, and noted it has 17.7 million active users on the platform with aggregate assets of around $81 billion.

However, more than three quarters of that revenue total came from larger brokerage firms in the form of so-called payment for order flows (PFOFs), a controversial practice that has caught the attention of the SEC.