Placing an options trade
Robinhood empowers you to place your first options trade directly from your app.
There are many things to consider when choosing an option:
The expiration date is displayed just below the strategy and underlying security. You can scroll right to see expirations further into the future.
The strike prices are listed high to low; and you can scroll up or down to see different strike prices
The premium (price) and percent change are listed on the right of the screen
The break-even point is where the underlying security needs to trade at expiration for you to break even on your investment, taking into account the current value (premium) of the option
The break-even percentage is the percentage change the underlying security would need to move for you to break even on the option at expiration
The chance of profit percentage is the probability your investment could be profitable if you’ve chosen the “sell” strategy
“Chance of profit” is an estimate based on model assumptions and does not guarantee future results. Numerous factors that are not reducible to a model determine the actual chance of profit for a particular option contract or strategy.
You can place Good-Til-Canceled (GTC) or Good-For-Day (GFD) orders on options. A GTC order remains open for 90 days until you cancel it, or it’s filled. A GFD order is automatically canceled at market close on the day it’s placed if it doesn’t execute.
There are two different ways to display the price (and determine the theoretical value) of an options contract: natural price and mark price.
As a reminder, the bid price is the highest price other traders in the market are willing to pay for an asset at a moment in time, and the ask price (also known as “offer”) is the lowest price traders are willing to accept for an asset at a moment in time.
By default, we display the “natural price” when buying and selling options, but you can change this by going to settings within options.
Note: Regardless of your default setting, mark price will still be used for a) multi-leg orders, b) options rolling, and c) calculating “Current Price,” “Total Return,” and other information regarding contracts you currently hold (e.g. your portfolio return).
If no buyers are currently available in the market, the mark price will display as $0.01.
We’re required to evaluate whether various levels of options strategies are appropriate for customers, based on information such as their trading experience, investment objectives, and financial situation. Each brokerage has the discretion to set the specific parameters for their customers. At Robinhood Financial, if you’re given a Level 2 designation, you can execute the following options trades:
If you’re given a Level 3 designation, you can execute all of the above trades, along with the whole collection of limited risk spreads, including Iron Condors, Iron Butterflies, and Credit Spreads.
Just like stock or ETF trading, buying and selling (or selling and buying) the same options contract on the same day will result in a day trade. It’s the same contract if the ticker symbol, strike price, expiration date, and type (call or put) are all the same.
Because of pattern day trade restrictions, you’re generally limited to no more than 3 day trades in a 5 trading day period, unless you have at least $25,000 of portfolio value (minus any cryptocurrency positions) in your Instant or Gold account at the end of the previous day.
If you have a cash account, you are not subject to pattern day trading restrictions, but you cannot access certain features, like Instant Deposits and trading with unsettled funds.
Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Robinhood Financial does not guarantee favorable investment outcomes and there is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing. To learn more about the risks associated with options, please read the Characteristics and Risks of Standardized Options before you begin trading options. Supporting documentation for any claims, if applicable, will be furnished upon request.