How to trade options on Robinhood: A beginner’s guide

Robinhood’s beginner- and user-friendly trading platform, zero commissions and competitive margin rates makes it a strong choice for new traders and investors looking to get started with options trading. While Robinhood offers basic and advanced options trading tools and strategies, it’s tools aren’t as robust as big brokers and more options-focused platforms.

Find out how to trade options on Robinhood, what strategies and tools are available and the pros and cons of using this platform.

How to trade options on Robinhood

To get started trading options on Robinhood, you need to open and fund an account. Robinhood offers options trading in its brokerage accounts and Level 2 options trading in its individual retirement accounts (IRAs), so you’ll need to choose an account based on your goals. Once you’ve opened and funded your account, you’ll need to enable options trading. Here are four steps that offer more detail on how this entire process works.

Step 1. Open and fund a Robinhood account

Robinhood’s account opening process is as simple and straightforward as it gets. Follow these steps to sign up:

1. Go to Robinhood’s website or app and select Sign up, or select the Go to site button below.
2. Provide your email, password, name, phone number, date of birth, address, citizenship status and Social Security number.
3. Answer a few questions about investing and provide details about your employment.
4. Review Robinhood’s agreements and link a debit card or bank account fund your Robinhood account.

Sign up with Robinhood now

• $0 stock, ETF and options trade fees, with no options contract fees
• Access up to $50,000 in instant deposits with Robinhood Gold
• Earn 5% interest on your uninvested cash with Robinhood Gold.

Go to site

Once you’ve opened a Robinhood brokerage account, you can then apply for a Robinhood IRA if you want to trade options in an IRA. Profits generated from options trading within an IRA are tax-deferred or tax-free, depending on the type of IRA — traditional IRA or Roth IRA. However, a brokerage account offers more liquidity, in that you can withdrawal money at any time without penalty. Unlike IRAs, brokerage accounts also have no contribution limits and allow for margin trading.

Step 2. Enable options trading in your account

Trading options requires approval on Robinhood. To enable options trading:

1. Log in to your Robinhood account and navigate to your account menu. Select Account from the navigation menu on the web browser or select the silhouette icon at the bottom of the screen on the mobile app
2. Select Investing and then scroll down to Options trading. The Investing section is under the hamburger icon in the top left corner on mobile.
3. Select Enable options trading and then Continue to start the application.
4. Answer the necessary qualifying questions and provide information about your option trading experience.
5. Review and confirm your investor profile and accept the options agreement.

Robinhood requires users to have stock trading experience before they can trade options and will either instantly approve or reject your application depending on your investment profile and the answers you provide during your application. Robinhood will approve your account for either Level 2 or Level 3 options trading, permitting either basic or advanced options strategies.

Dive deeper: What is options trading? Learn how options trading works and how to get started

Step 3. Select and trade options

Robinhood’s user-friendly design and streamlined trading experience extends to its options trading. But it’s important to take some time to explore and familiarize yourself with Robinhood’s options trading process so you can evaluate the risk/reward, define options parameters and fully understand the costs before you get started.

Follow these steps to select and complete an options order:

1. Select the magnifying glass to browse securities, and enter the ticker symbol of the stock or ETF with which you want to trade options.
2. Select Trade and then Trade options to enter the options trading screen.
3. Use Robinhood’s options strategy builder or browse by expiration date.
4. Select a trade to view details like bid and ask price, chance of profit and other stats. To move forward with that trade, select Buy or the + symbol from within the contract.
5. Enter the number of contracts and a limit price.
6. Review your order and submit.

What Matt thinks about options trading

If you don't understand options trading, don't do it. Just like any other investment, get educated and take the time to understand it. Only then will your investment be rational.

— Matt Miczulski, Editor, Investments.

Step 4. Closing options trades

If you don’t act upon the contract before the expiry date, it simply expires. You can also close your trade ahead of the expiry date if the option has reached your predefined profit target or if the option has moved against you and reached your predetermined loss limit. Here’s how to close your options trade on Robinhood:

1. Log in to your account and select the order you want to close.
2. Select Trade and Close.
3. Select the number of contracts you want to close.
4. Review the order and execute your trade.

Robinhood has two options trading levels

Robinhood has two levels of options trading: Level 2 and Level 3. New options traders will start in Level 2, which offers basic options strategies.

Robinhood’s Level 2 strategies

Robinhood offers the following basic options strategies to investors approved for Level 2:

• Long call
• Covered call
• Long put
• Short put

Check your options trading level in your Robinhood account details under Settings. If you’re Level 2, you can request to upgrade to Level 3 at any time, but your application may not be approved until you meet Robinhood’s internal eligibility criteria.

We reached out to Robinhood to get an idea of what’s needed to be approved for Level 3. We were told that customers may need to go through a manual review process, which includes someone from the Robinhood brokerage operations team reaching out to test your knowledge regarding options trading.

Robinhood’s Level 3 strategies

Robinhood’s Level 3 options strategies are much more advanced with considerably higher risk. Robinhood requires traders to have experience trading options before qualifying for Level 3.

Available advanced options strategies include:

• Long straddle
• Call debit spread and put debit spread
• Call credit spread and put credit spread
• Long call calendar
• Long put calendar and short put calendar
• Long call condor and short call condor
• Long put condor and short put condor
• Long iron condor and short iron condor
• Long call butterfly and short call butterfly
• Long put butterfly and short put butterfly
• Long iron butterfly and short iron butterfly
• Put front ratio
• Call back ratio and put back ratio

Related: Learn more about the different options strategies

Robinhood’s options fees

Robinhood’s one of just a handful of brokers that doesn’t charge options commissions, contract fees or exercise and assignment fees, making it one of the most affordable platforms for options traders.

Commissions	$0
Contract fees	$0
Exercise and assignment fees	$0
Margin base rate	8% (12% without Robinhood Gold)
Options Regulatory Fee per contract	$0.01
OCC Clearing Fee per contract	$0.02 (Max $55 per trade)

Pros and cons of trading options on Robinhood

Robinhood’s user-friendly trading platform simplifies the options trading experience but that platform has some downsides too.

Pros

• Low trading costs. Robinhood charges no options commissions, no options contract fees and no exercise and assignment fees.
• Simple user interface. Robinhood’s streamlined and easy-to-use interface simplifies the trading and investing experience.
• Trade multiple strategies. Robinhood offers numerous options trading strategies depending on your experience level.

Cons

• Limited analytical data. Robinhood’s trading tools are not as robust as other platforms on the market, including big brokers like Charles Schwab and E*TRADE and mobile-first apps like Webull and Moomoo.
• Risk of outages. Robinhood has experienced occasional outages and technical issues in the past, particularly during periods of high market volatility. These outages can prevent users from accessing their accounts or executing trades, potentially causing frustration and financial losses.
• Order execution. Some users have reported issues with Robinhood’s order execution, including delayed fills and poor trade execution during periods of high market volatility. This can result in missed trading opportunities or unfavorable pricing for options trades.

Compare Robinhood to Options trading platforms

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Frequently asked questions

Why can’t I trade options on Robinhood?

Robinhood must approve your account for you to enable options trading. If you’re unable to trade options on Robinhood and your investor profile is current, it’s likely because you’re ineligible for options trading.

What is the best options trading platform?

Finder’s analysis of 18 brokers to find the best brokerage accounts determined that tastytrade is the best options trading platform. It offers the most diverse lineup of options products, competitive pricing and some of the most powerful options trading tools.