How to Buy Options on Robinhood • Step by Step • Benzinga

Want to jump straight to the best options broker? Most people prefer Interactive Brokers for their options trades. Robinhood, which popularized the concept of “ gamified ” induct, accomplished what fiscal advisors have tried to do for years : get younger Americans excited about investing and planning for the future .
As a commission-free servicing that besides extends to the options grocery store, Robinhood encourages beginners to ramp up their hazard profile. many investors finally explore options because they use leverage. You can control more shares than you could otherwise yield by buying them directly with options .
The options market can have potential downsides with leverage and other intricacies. We ’ ll review more on options, and you can even learn how to buy calls on Robinhood. Read our Robinhood app review for more information. With Robinhood options explained, you can expand your portfolio and partake in an investment joyride that can be quite lucrative.

  1. Understand the Basics While options are traded like stocks, stocks and options are not interchangeable. While some lap exists, they are divide concepts, each with a different end purpose.

    Primarily, options represent a type of derived function security. This is to say that options do not have intrinsic value of their own. First, their price is derived from the stock with which they are associated.

    Second, options are contractual agreements that give the buyer the properly to purchase the underlying stock at a pin down price at a predetermine date. In contrast, the seller is obligated to follow through on those terms. Depending on market conditions, certain options present themselves as either very valuable or despicable.

  2. Recognize Your Risks One of the biggest risk factors involving options is that they have passing dates. Unlike publicly traded securities that only go to $ 0 in the case of underlying business failure, options have a predefined timeline.

    You might think this sounds quite dangerous for your portfolio, and that ’ s correct ! typically, buying options tends to be a binary affair, meaning you either make money or lose everything you put into them.

    But to be carnival, this dramatically increased risk profile relative to bread-and-butter store buy strategies offer frightful reward potential. therefore, you should understand your personal risk tolerance before engaging options.

  3. Know Key Concepts not lone do purchasing options contracts give you leverage if you have a bullish take on a particular stock, but you can besides advantage the opposition side of the trade — benefit on bearish price action. You want Robinhood options explained before you continue, specially regarding bearish trade.

    To go long ( bullish ), you buy call options, which give you the correct to buy shares of the underlying lineage ( constantly sold in 100-share lots ) at a specific price ( called the strike price ) at a preset time ( passing date ).

    To go short ( bearish ), you buy put options, which give you the right to sell shares of the underlying banal ( again, in 100-share lots ) at the strickle price, no matter the market monetary value.

    Keep in take care that you don ’ t need to wait till the passing date to exercise options. once your options are “ in the money ” ( that is, the strike price is favorable to your status ), you may be able to sell your options at a bounty above what you paid for them.

    Conversely, if your options are “ out of the money, ” their value will normally have a discount rate against the price you paid for them. Options in which the strike price matches that of the underlie security are “ at the money. ”

    If you learn how to buy calls on Robinhood rather of buying stigmatize new options, you can purchase the option at a low price from person else, wait for the option to mature and collect the profits. Buying calls reduces your overhead and potentially increases profits. For example, if you buy calls for $ 3 a share ( the agio on the option ) alternatively of $ 50 a contribution, you ’ ve already saved money.

  4. Click “Trade Options” on Robinhood now that you have some of the basics under your belt, hera are the specific steps to take to trade options on Robinhood :

    – At the top right corner of the home page, hit the blow up glass icon.
    – Search for the malcolm stock for which you would like to purchase options.
    – If the malcolm stock is available, go ahead and tap it.
    – At the buttocks right corner in the aim stock ’ s “ Detail ” page, you ’ ll see a green “ Trade ” button which you can click.
    – Next tap “ Trade Options. ”

  5. Learn Robinhood’s Platform As with every platform, Robinhood has its own intricacies. For exemplify, if you want to know how to sell stock on Robinhood, it may differ from other platforms. here ’ sulfur where to look for critical data on your options trade.

    Expiration date: Easily the most significant agent to consider, the passing date is presented below the strategy and underlying stock. You can besides scroll veracious to see the termination schedule of future dates. While a longer passing date gives you greater time for your options to become profitable, they are sold at a higher premium, all other factors being equal.

    Strike prices: hit prices are listed from high to low and you can scroll vertically to see the full crop of available choices.

    Premium: The premium represents the mark price of the option — the choice ’ s prize. The percentage change is how much that detail contract moved during the seance. These figures are located on the correct of your sieve.

  6. Place the Right Type of Order When using Robinhood for trade options, you have the ability to place good-til-canceled or good-for-day orders.

    Good-til-canceled orders stay open for 90 days until they are filled or you cancel them anterior to filling.

    Good-for-day orders are precisely like they sound — they will either be filled or canceled at the close of the trade session.
    As you progress in your options trade journey, you will have the option to advance to higher levels. In Robinhood, the maximum appellation you can achieve is Level 3. In Level 4, traders can sell short calls and light puts, which are incredibly hazardous strategies where the potential loss is outright.

    Obviously, such access is limited to the most advanced traders. Someday, you may wish to learn how to transfer your stocks off Robinhood and play with the alpha wolves on a more twist platform.

Robinhood Alternatives

Although Robinhood is arguably the most convenient chopine to trade stocks and options, this appliance has a price tag of its own. For case, you don ’ t have the full width of investing selections as you would in more promote offerings, thereby limiting you to what options contracts are available .
As previously mentioned, Robinhood limits your ultimate appointment to Level 3. At a broader level, this limit protects the ship’s company from potential legal and fiscal indebtedness issues. In summation, it prevents cub traders from taking on more hazard than they should handle. however, if you truly want to take your trade game to the adjacent level, you should consider Robinhood alternatives .
Below is a list of potential offerings that may be better suited for your options trading ambitions .

TradeZero

Best For
Scalping
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Best For
Scalping

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1 Minute Review
TradeZero is an on-line broker and free standard trade platform that provides everything you need to successfully plowshare and trade, including around-the-clock customer confirm. TradeZero provides four unlike trading state-of-the-art software programs with its services, a locator for sourcing shares for shorting, commission-free trades, and real-time streaming, to name a few of the features promoted on their web site. The software is a singular and ( potentially ) low-cost option for anyone concern in stock trade .
Best For

  • Traders seeking high transparency and mobility in a stock trading program
  • Those attracted to commission-free trades
  • Those seeking a free version of a high-quality trading program

Pros

  • 24/7 live customer support
  • Uses ZeroWeb technology, a powerful level 2 online platform with direct market access
  • Mobile app allows users to access stocks and trade in real-time while on the go

Cons

  • Enforces Pattern Day Trading restrictions (accounts need to maintain a daily equity balance of at least $25k)
  • Mobile app could offer more features

Webull

Best For
average Traders and Investors
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Best For
intercede Traders and Investors

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Webull, founded in 2017, is a mobile app-based brokerage house that features commission-free stock certificate and exchange-traded fund ( ETF ) trading. It ’ south regulated by the Securities and Exchange Commission ( SEC ) and the Financial Industry Regulatory Authority ( FINRA ).

Webull offers active agent traders technical foul indicators, economic calendars, ratings from inquiry agencies, margin trade and short-selling. Webull ’ s trading platform is designed for intermediate and experience traders, although beginning traders can besides benefit .
Webull is widely considered one of the best Robinhood alternatives .
Best For

  • Active traders
  • Intermediate traders
  • Advanced traders

Pros

  • No account maintenance fees or software platform fees
  • No charges to open and maintain an account
  • Intuitive trading platform with technical and fundamental analysis tools

Cons

  • Does not support trading in mutual funds, bonds or OTC stocks

Axos Invest

Best For
Sign Up Bonus
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Best For
Sign Up Bonus

N/A
1 Minute Review
It seems like new digital investment management platforms are sprouting up left and right, and for good reason — there ’ s a great need for easy, aboveboard investment management that doesn ’ t monetary value an sleeve and a branch in fees or to get started. If you ’ re newly to investing or an old hat who wants to make the switch to a virtual coach, deciding which features you need can be confusing if not overwhelming .
If you want a no-frills fiscal management platform, Axos Invest ( once WiseBanyan ) takes a traditional but sophisticate approach to automated on-line endow .
Best For

  • Traditional investors trying out an automated investor for the first time
  • New investors that want to take a hands-off approach to portfolio management

Pros

  • Straightforward automated investing
  • Relatively low account minimum and automated investing fee
  • A solid roster of available investment account types

Cons

  • Not a stand-out from other services if you’re someone who likes all the bells and whistles with your digital financial platform
  • No direct relationship with a human financial advisor

Interactive Broker

Best For
Global and Active Traders
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securely through Interactive Broker ’ s web site
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Best For
Global and Active Traders

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interactional Brokers is a comprehensive trade platform that gives you access to a massive crop of securities at low-cost prices. You can buy assets from all around the global from the quilt of your home or office with access to over 135 ball-shaped markets. Options, futures, forex and fund trade are besides available, and most traders won ’ thyroxine give a mission on any purchase or sale .
IBKR is geared chiefly toward have traders and investors but now with the handiness of barren trades with IBKR Lite, fooling traders can besides acclimate to IBKR ’ sulfur offerings .
Best For

  • Options traders
  • Traders trading 24/7
  • Sophisticated investors
  • Access to International markets

Pros

  • Advanced trading platform & suite of options trading tools to create & execute sophisticated trading strategies
  • Fixed fees offer infrequent traders low, flat rate per contract, inclusive of all fees
  • Tiered fees offer active traders lower cost per transaction and possible exchange rebates for higher volumes

Cons

  • Beginner investors might prefer a broker that offers a bit more hand-holding and educational resources

A Convenient and Powerful Platform for Options

You may recognize Robinhood as a commodious room to buy stocks. But if you want to climb the run of trade vehicles, Robinhood besides provides an comfortable, intuitive way to purchase options contracts.

Options are a mighty tool for investors. however, education is key. You ’ ve got to know what you ’ re doing to maximize net income potential and minimize risk. After you have Robinhood options explained, you can try this investment tool and determine how well it works for you .
Though Robinhood ’ second offers an unbeatable platform in terms of ease of use, it does have limitations, particularly if you wish to adopt more promote options trade strategies and tactics or want to open up the broad spectrum of investing selections. Do your research and choose the platform that best suits your needs .

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