Placing an options trade
Robinhood empowers you to place your first options trade directly from your app.
If you have multiple accounts (such as a brokerage account and an IRA account), make sure you've chosen the correct account before placing a trade.
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 doesn't guarantee future results. Numerous factors that aren't 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 2 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 the 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.
Regardless of your default setting, mark price will still be used for:
If no buyers are currently available in the market, the mark price will show as $0.01 for single-leg positions.
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 crypto positions) in your margin account at the end of the previous day.
If you have a cash account, you're not subject to pattern day trading restrictions, but you can't access certain features, like 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.
Margin investing involves the risk of greater investment losses. Before using margin, customers must determine whether this type of strategy is right for them given their investment objectives and risk tolerance. For more information, review our Margin Disclosure Statement.
Robinhood does not promote day trading. Day trading can be extremely risky. Day trading is generally not appropriate for someone of limited resources, limited investing experience, and low risk tolerance.
Securities trading is offered through Robinhood Financial LLC (member SIPC), which is a registered broker-dealer. Robinhood Securities, LLC (member SIPC) is a registered broker-dealer and provides clearing services. Robinhood Crypto, LLC provides crypto currency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).