How To Do Options On Robinhood

Guest  |  Feb 26, 2021

These days, the financial news is buzzing about the Robinhood app. By democratizing stock investment, this app has helped quite a few people change their personal financial outlook.

Getting Started on Robinhood

Fortunately, it's not too tough to enable options on Robinhood. When Robinhood started offering fee-free options trading in 2017, a lot of people thought Robinhood's business model wouldn't work. Instead, Robinhood has disrupted the options market entirely. This app was designed to provide an easy learning curve for new investors. First off, download the Robinhood app to your phone or mobile device. By listing this app on their stores, Google and Apple have essentially given this app their basic seal of approval. Alternately, it is possible to use Robinhood over their online Web portal. One of the most lucrative things you can do with Robinhood is trade options. When you buy options, you don't buy or sell stocks. Instead, you buy certain rights related to stock transactions. The call option gives you the right to buy a certain amount of company shares over a specified future time period. Put options allow you to sell options over a specified period.

Opening a Robinhood Account

When you use Robinhood for the first time, Robinhood asks you to provide a few personal details. These include but are not limited to: your name, address and bank details. Naturally, you have to provide this information if you want to receive a payout when you realize investment profits. Because it has been around for a while, you can trust Robinhood to keep your personal information safe and secure.

Navigating the Trading Interface

Once you complete the registration process, you're ready to purchase stock options. Although Robinhood has limited options trading capabilities, these capabilities should be sufficient for the small-scale investor. First off, click on the stock that you're ready to purchase options for. If you click on GME, for example, you should see a "Trade GME Options" button on the right side of the interface. This opens up a new interface window where you can get more specific with your trade. On the top part of the screen, you'll see buy, sell, call and put options. Select the appropriate buttons for your transaction and choose an expiration date for the option. If you're expecting GME to drop in the next ten days, buy a put option that expires in precisely ten days.

Options trading can be highly lucrative. However, there are plenty of risks involved in this type of transaction. Brokerages like Robinhood allow you to purchase options on margin. This means that if your option isn't profitable, you could end up owing money. As with any type of high-reward investment, you should be sober and realistic as you get into options trading. Although Robinhood has opened up trading profits to millions of people, it also exposes the masses to experiencing investment losses for the first time.

If you prudently limit your exposure to losses, Robinhood can do wonderful things for your financial life. Through this amazing app, millions of ordinary people can finally discover what options trading is all about.

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