Robinhood glossary | Robinhood

Robinhood glossary

Here’s a list of terms and concepts you may come across as you begin to trade assets with your Robinhood account. Also for crypto trading, check out the Robinhood Crypto glossary.

ADR

Stocks

ADRs (American Depository Receipts) make it easier for American investors to buy shares of foreign companies not listed on U.S. exchanges like the NYSE or Nasdaq. Owning an ADR is like owning a share of the company, except the shares of the ADR are denominated in American dollars instead of the currency of the company’s home country. These shares still pay dividends and are still subject to capital gains taxation in US dollars. Check out the assets available on Robinhood for more information.

Assignment

Options

If you sell an options contract, you may be assigned, which means the person you sold the contract to wants to exercise and make good on the terms of the contract. For a more detailed explanation of how assignment works on Robinhood, check out Investing with options.

Bid-ask spread

Stocks and options

The bid-ask spread represents the supply and demand for a stock, option, or crypto. The bid price is the highest price other traders in the market are willing to pay for the asset, and the ask price is the lowest price traders are willing to accept for the asset.

For options, the price we display in the app is the mark price, which is the midpoint between the bid price and the ask price. For example, if the bid price is $0.10 and the ask price is $0.20, the mark price is $0.15. If you enter a limit order on an option that has a large spread, you'll see the mark change in the app.

For stocks, we show the last trade price reported by Nasdaq exchange.

Buying power

Stocks, options, and crypto

Buying power is the amount of money you can use to purchase stocks, options, or crypto.

Call

Options

A call option is a type of options contract. Owners of call options generally expect the stock to increase in value, while sellers of call options generally expect the stock’s value to decrease or remain the same. Check out Investing with Options to learn more about trading call options on Robinhood.

Corporate action

Stocks

A corporate action is any activity a company takes that results in a significant change to the company's stock. Learn more about the different types of corporate actions and how they affect your investing account in Mergers, stock splits, and more.

Delisting

Stocks

A stock is delisted when it’s been removed from the stock exchange. You can’t trade delisted stocks with Robinhood. You can learn more about what to do if you own a delisted stock in Mergers, stock splits, and more.

ETF

Stocks

An exchange-traded fund (ETF) is a group of assets pulled together that trades like a normal stock. Ownership of the fund (they could be a collection of stocks, bonds, or derivatives, for example) is divided into shares that you can buy and sell in the market.

Exercise

Options

If you buy an options contract, you have the right to “exercise” it, which means you’d like to fulfill the terms of the contract. For a more detailed explanation of how exercising works on Robinhood, check out Investing with Options.

Extended-hours trading

Stocks

Robinhood customers have access to extended-hours trading, which means you get more time to trade with us. Check out Extended-hours trading for details.

FINRA

Robinhood Financial is a member of the Financial Industry Regulatory Authority, Inc. (FINRA), a self-regulatory organization that promotes honesty and fairness in the broker-dealer industry.

First in first out (FIFO)

Stocks

This refers to the way Robinhood calculates your cost basis. When you sell stocks, we record the cost you paid for your positions in the order you bought them. You can view your average cost basis for a stock you own on the stock’s Detail page.

Forward stock split

Stocks

If a company executes a forward stock split, it’s increasing the number of shares outstanding without changing the overall market value of the shares. There will be more shares in the market, but each share will be worth less than it previously was. Check out Mergers, stock splits, and more to learn more.

Fractional shares

Stocks

A fractional share is a piece of one whole share of stock. Since Robinhood Financial offers fractional shares, you can trade stocks and ETFs in pieces of shares, in addition to trading in whole share increments. Check out Fractional shares to learn more.

Good-til-canceled (GTC)

Stocks, ETFs, and options

Good-til-canceled refers to a type of order you can place in the market. A GTC order will remain open until you cancel it, it’s filled, or for equities, if the stock undergoes a corporate action and all open trades are canceled. GTC limit orders expire after 90 calendar days.

Good-for-day (GFD)

Stocks and options

Good-for-day refers to a type of order you can place in the market. A GFD order will remain open until market close on the day you place it (if it doesn’t execute before the close). Check out Order types for more details.

High-volatility stocks

Stocks

Volatility is a measure of how dramatically the value of a stock changes in a given period. Highly volatile stocks are considered riskier investments, and regulations inform how much money you can borrow to invest in these stocks.

In-the-money

Options

In-the-money refers to the value of an options contract’s underlying stock relative to the contract’s strike price. For a more detailed explanation of how this factors into the value of an options contract, check out Investing with options.

Instant settlement

With a Robinhood Instant or Robinhood Gold account, you have instant access to funds from bank deposits and proceeds from sales.* This means that if you sell a stock today, you can use the funds right away, instead of waiting the typical 2 trading days for access to those funds.

*The amount of funds made available instantly depends on your account type and the source of the funds from a sale. Funds from recent stock, ETF, and options sales may not be available instantly for buying crypto.

IPO

Stocks

An initial public offering (IPO) is the process of raising capital by offering shares of the company to the public for the very first time. For details, check out Pre-IPO orders.

Last sale price

Stocks

The last sale price of a stock is the most recent price at which a trade was executed in the market. We use Nasdaq’s last sale price for the market prices we display in the app.

Limit order

Stocks and options

A limit order allows you to choose the price you’d like to pay for an asset, so that if the asset rises or falls within that range you’ll get executed at that price or better.

For example, if ABC is trading at $10, you can place a limit buy order at $9, which will execute when ABC is offered at $9 or lower in the market. The same is true for limit sell orders: you can specify the minimum amount you’re willing to receive when you sell your asset.

Check out Limit order to learn more.

Limit price

Stocks and options

A limit price lets you choose a specific price that you’re willing to buy or receive for an asset. For a buy order, the limit price is the maximum amount you’ll pay. For a sell order, the limit price is the minimum amount you’ll receive.

Low-priced stock

Stocks

A low-priced stock, also known as penny stock, generally refers to a stock issued by a company that’s valued at less than $5 per share.

Low-volume stock

Stocks

A stock has low volume if there aren’t very many people trading it in the market. The prices for these stocks can change dramatically because each individual trader can have an outsized influence on the price of the stock. This makes them inherently more risky.

Margin

Stocks

Buying stocks on margin means that you’ve borrowed money from your investing account to fund your purchase. Robinhood Gold is a margin account. Check out Investing with margin to learn more about using margin at Robinhood.

Margin maintenance

Stocks

The margin maintenance requirement is the minimum portfolio value you can have before you’re at risk of getting into a margin call. Check out What’s margin maintenance to learn more about avoiding margin calls.

Margin call

Stocks

A margin call is warning that your portfolio value is below your margin maintenance requirement. If you get a margin call, we may sell some of your stocks in order to bring your maintenance requirement down and your portfolio value up. Check out What’s margin maintenance to learn more about avoiding margin calls.

Market hours

Stocks and options

The stock market opens for trading at 9:30 AM ET and closes at 4 PM ET during normal trading sessions. Check out Extended-hours trading for more details on trading outside of regular market hours.

Market order

Stocks and crypto

A market order is an order that will execute at the next price in the market. Be careful, though, because stocks that are highly volatile can change price quickly, and you’re never guaranteed a price with a market order.

Check out Market order to learn more.

Merger

Stocks

If two companies merge, there are almost always significant implications for the shareholders of both companies. Typically, the acquiring company will choose to liquidate the shares of the acquired company for cash or give out shares of their own company to shareholders of the acquired company. Check out our Trading Guide to learn more.

Nasdaq

Stocks

Nasdaq, like NYSE, is a stock exchange where buyers and sellers can trade stocks. A notable difference between them is that Nasdaq has no physical location because it’s an entirely electronic trading network. A Nasdaq exchange (the Nasdaq Stock Market, NASDAQ OMX BX, or NASDAQ OMX PHLX) is also an important index for American technology stocks.

NYSE

Stocks

The New York Stock Exchange, known as NYSE, is the biggest stock exchange in the world.

Obligation

Options

If you sell an options contract, you have the obligation to make good on the contract if you’re assigned. For a more detailed explanation of how assignment works on Robinhood, check out Investing with options.

Option

Options

An option is a contract between a buyer and a seller. These contracts are part of a larger group of financial instruments called derivatives. This means that the instrument is derived from another security–in this case, a stock. Check out Investing with options to learn more.

Out-of-the-money

Options

Out-of-the-money refers to the value of an options contract’s underlying stock relative to the contract’s strike price. An options contract isn’t profitable for the buyer if it’s out-of-the-money. For a more detailed explanation of how this factors into the value of an options contract, check out Investing with options.

Partial execution

Stocks

A partial execution occurs when only some of your order is filled. Before an order can execute, a buyer and seller must be on both sides of the trade. If the market doesn’t have enough shares at your limit price, it may take multiple trades to fill the entire order. These most commonly occur with limit orders placed on low-volume stocks.

Example

Let’s say ABC stock is trading at $10, and you place an order to sell 1,000 shares of ABC at $11. Your order is matched with a buyer willing to pay $11 for 400 shares. So your order gets a partial execution of 400 shares instead of 1,000 shares because not enough shares were available to sell for $11.

Premium

Options

When you buy an options contract, the premium is the price you pay the seller for the contract. For a more detailed explanation of how premiums work on Robinhood, check out Investing with options.

ProxyVote

Stocks

ProxyVote is a third-party service we use to allow you to participate in shareholder meetings and elections. You’ll receive an email from ProxyVote before a relevant event occurs with instructions on how to participate.

Put

Options

A put option is a type of options contract. Owners of put options either expect the stock to decrease in value or want a measure of protection if their stock decreases. Sellers of put options expect the stock’s value to increase or remain the same. Check out Investing with options for more details.

Regulation T call

Stocks

Your investing account might get a Regulation T call, sometimes referred to as a Reg-T call, if your account doesn’t meet the initial margin requirement for stocks you’ve purchased. Check out Account restrictions for more information on how this type of call can affect your account.

Reverse stock split

Stocks

If a company executes a reverse stock split, it’s decreasing the number of shares outstanding without changing the overall market value of the company. There will be fewer shares in the market, but each share will be worth more than it previously was. Check out Mergers, stock splits, and more to learn more.

Right

Options

If you buy an options contract, you have the right to exercise the contract. If you sell an options contract, you don’t have this right. For a more detailed explanation of how exercising works on Robinhood, check out Investing with options.

SEC

The U.S. Securities and Exchange Commission (SEC) oversees and regulates Robinhood Financial on behalf of the United States government.

Settlement

Stocks

Settlement is the time it takes stocks or cash to move from one investing account to the next. The normal stocks and cash settlement time is the trade date (T) plus 2 trading days, commonly referred to as T+2.

Spinoff

Stocks

A company’s board may decide to create a new subsidiary of their company. If they also award shareholders of the parent company shares of the new company, they’ve executed a spinoff. Check out Mergers, stock splits, and more to learn more.

Strike price

Options

You’ll encounter strike prices if you trade options. The strike price of an options contract is the price at which the contract holder can choose to exercise their contract.

Stock split

Stocks

A company’s board can decide to execute a stock split if they want to increase or decrease the number of shares they have outstanding. Companies can execute a forward or reverse stock split. Check out Mergers, stock splits, and more to learn more.

Stock transfer

Stocks

Stock transfer allows you to transfer shares of stock from other brokerages into your Robinhood investing account and vice versa.

Stop price

Stocks

When a stock hits your stop price, the stop order becomes a market order and is executed at the best price currently available. Check out Stop order to learn more.

Stop order

Stocks

A stop order is an order type that triggers a market order to buy or sell when the stock reaches your designated stop price.

Example

Let's say XYZ stock is trading at $25, you can place a sell stop order at $20 to trigger a market sell order in the event the stock reaches $20 or lower. Check out Stop order to learn more.

Stop limit order

Stocks

Similar to a stop order, a stop limit order allows you to set a stop price. The difference is that a stop limit order will trigger a specified limit order when the stock reaches your stop price. You can use this type of order to set parameters around the price your trade will execute at once the stop is triggered, but there’s a risk that the order won’t execute if the stock price moves past your limit.

Example

Let's say XYZ stock is trading at $25, you can enter a sell stop limit order with a $20 stop and a $19.90 limit. Once the stock reaches $20, a limit order will trigger to sell XYZ stock when it’s trading at $19.90 or higher. Check out Stop limit order to learn more.

Stop market order

A stop market order, also known as a stop-loss, triggers a market order if the option price falls to the stop price. You can use these orders to manage your risk exposure, maintain disciplined exit strategies, and auto respond to sudden market shifts.

Time-in-force

Stocks

To indicate how long your market, limit, or stop order will remain active, you can set a time-in-force. The time-in-force options include Good-for-day (GFD) and Good-til-canceled (GTC).

Trail

Stocks

You can set a trail when placing a trailing stop order. A trail is the amount at which the trailing stop price follows behind the best price of a stock. You can set your trail either as a fixed dollar amount or percentage.

Check out Trailing stop order for details.

Two-factor authentication

Two-factor authentication is a tool that allows you to add another layer of security to your account.

Untradeable

Stocks

If a stock is untradeable on Robinhood, you won’t be able to buy or sell shares of it. You can learn more about why a stock may be untradeable in Mergers, stock splits, and more.

Wash sale

Stocks

If you sell a stock for a loss, and then buy the same stock or a similar stock within 30 calendar days, you’ve executed a wash sale. The IRS prohibits taxpayers from claiming losses from wash sales for tax purposes.

Disclosures

All investing involves risk.

IPOs can be risky and speculative investments, and may not be appropriate for every investor.

Options trading entails significant risk and is not appropriate for all investors. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies.

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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). Review a list of RHC licenses for more information.The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Review a list of our licenses for more information. Credit card products are offered by Robinhood Credit, Inc. ("RCT") (NMLS ID: 1781911 and issued by Coastal Community Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated.

RHF, RHY, RHC, RCT, and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC, RCT, and RHS are not banks. Products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. RHC isn’t a member of FINRA and accounts are not FDIC insured or protected by SIPC.

RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). Review a list of RHC licenses for more information.The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Review a list of our licenses for more information. Credit card products are offered by Robinhood Credit, Inc. ("RCT") (NMLS ID: 1781911 and issued by Coastal Community Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated.

RHF, RHY, RHC, RCT, and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC, RCT, and RHS are not banks. Products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. RHC isn’t a member of FINRA and accounts are not FDIC insured or protected by SIPC.

RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

Robinhood, 85 Willow Road, Menlo Park, CA 94025.© 2024 Robinhood. All rights reserved.