Based on this current paper from the Journal of Finance (October 2020 working paper here), do you think it is possible to profitably short the most bought stocks at Robinhood? Of course position sizing is very important, since some of the stocks have skyrocketed before falling back to earth. I wonder if the effect is large enough that a limited risk strategy such as buying puts on most-bought stocks has worked. Attention-Induced Trading and Returns: Evidence from Robinhood Users ABSTRACT We study the influence of financial innovation by fintech brokerages on individual investors’ trading and stock prices. Using data from Robinhood, we find that Robinhood investors engage in more attention-induced trading than other retail investors. For example, Robinhood outages disproportionately reduce trading in high-attention stocks. While this evidence is consistent with Robinhood attracting relatively inexperienced investors, we show that it is also driven in part by the app's unique features. Consistent with models of attention-induced trading, intense buying by Robinhood users forecasts negative returns. Average 20-day abnormal returns are −4.7% for the top stocks purchased each day.
There isn't enough history with Robinhood to mathematically answer this question in any meaningful way. So my answer is "no". But I'm sure we can discuss the hypothesis at length.
Guess it's doable but not blindly. The most you can make is 100% if it goes to zero. While WSB can push the stock 10X or more. It's a sucker bet. Timing has to be to the point. There are plenty of guys shorting pumps. Obviously any pump is going to dump sometime. There are known guys specialized in this kind of shorts. Thinking about ... Sykes ? Nathan Michaud. Kristjan Kullamägi in a way. These guys might be looking to short EPIX Rn
Might be worth researching more, but there are bunches of papers both favorable and unfavorable to the idea.
RH used to sell that - not certain if they still do or if a market for it exists. Their router wholesaler would have it.