The basic steps to buy a call on Robinhood

To buy a call option on Robinhood, open the app, search for the stock you want, tap the stock name to open its detail page, then tap "Trade" and select "Buy" from the menu. Choose "Options" instead of "Shares", pick the call contract you want (by expiration date and strike price), enter how many contracts you want to buy, review the cost, and confirm the order.

The entire process takes about two minutes once you know which call you're looking for. Robinhood shows you the current bid and ask price for each contract, the break-even price at expiration, and how much money the trade will cost upfront. You do not need to have the full stock price in cash — a single call contract costs a fraction of what 100 shares would cost, which is why options attract traders with smaller accounts.

One thing to understand before you start: Robinhood will only let you trade options if you have turned on options trading in your account settings. This is a separate permission from regular stock trading, and the app will prompt you to enable it the first time you try to buy an option.

Key Takeaways

  • You must enable options trading in your Robinhood account settings before you can buy any call contracts.
  • A call option gives you the right to buy 100 shares of a stock at a fixed price (the strike price) by a certain date (the expiration date).
  • The price you pay upfront for a call is called the premium, and that is the most you can lose on the trade if the stock price falls.
  • Call contracts expire on specific dates — usually Fridays — and if you do not sell or exercise the contract before expiration, it becomes worthless if the stock is below the strike price.
  • Robinhood charges no commission on options trades, but the bid-ask spread (the difference between what buyers will pay and what sellers want) is the real cost you pay.

Understanding strike price and expiration date

When you open the options chain for a stock, you see a list of call contracts organized by expiration date and strike price. The strike price is the price at which you have the right to buy the stock. The expiration date is when that right expires — usually a Friday, but some stocks have daily or weekly expirations too.

If you buy a call with a $50 strike price and the stock rises to $60, your call is now "in the money" by $10 per share (or $1,000 per contract, since one contract controls 100 shares). If the stock stays at $45, your call is "out of the money" and loses value as expiration approaches. The premium you paid upfront is what you lose if the stock never rises above your strike price.

Calls that expire sooner (days away) are cheaper than calls that expire months away, but they also lose value faster if the stock does not move. Calls with strike prices far above the current stock price are cheaper but require a bigger move to make money. There is no single "right" choice — it depends on how much you want to spend and how much you think the stock will move.

How much a call costs and what happens to that money

The price you see for a call contract is the premium — the cost to buy that right. Robinhood shows this as a per-share price, so you multiply it by 100 to get the total cost. If a call shows a price of $2.50, you pay $250 to buy one contract ($2.50 × 100 shares).

That $250 is the maximum you can lose on the trade. If you buy the call and the stock price falls, the call loses value, but your loss is capped at what you paid. You cannot lose more than your premium — the broker will not ask you for additional money if the trade goes against you. This is different from selling calls, which carries unlimited risk.

The premium you pay goes to whoever sold you the call contract. On Robinhood, you are usually buying from other traders or market makers, not from the company itself. The bid-ask spread — the gap between what buyers will pay and what sellers want — is where Robinhood's profit comes from, even though they charge no commission.

When and how to sell a call before expiration

You do not have to hold a call until expiration. Most traders sell their calls before expiration day arrives, either to lock in a profit or to cut a loss. To sell, go to your positions tab, find the call contract you own, tap it, select "Sell", choose how many contracts to sell, and confirm.

The price you get when you sell depends on how much time is left and how far in or out of the money the contract is. If you bought a $50 call for $2.50 and the stock is now at $55, you might be able to sell that same call for $6.00 — locking in a $3.50 per-share profit, or $350 per contract. If the stock fell to $48, you might only get $0.50 back, meaning you lost $2.00 per share on the trade.

Selling before expiration is usually smarter than holding until the last day, because a call loses value very quickly in its final hours if it is out of the money. Many traders set a target profit (like 50% gain) or a stop-loss level (like 20% loss) and sell automatically when the price hits that mark.

What happens if you do not sell before expiration

If you hold a call all the way to expiration and the stock is above the strike price, Robinhood will automatically exercise the call — meaning it will buy 100 shares of the stock at your strike price and add them to your account. If you do not have enough cash to cover the purchase, Robinhood will use margin (borrowed money) to complete the trade, and you will owe interest on that borrowed amount.

If the stock is below the strike price at expiration, the call expires worthless and disappears from your account. You lose the entire premium you paid. This is the most common outcome for calls that traders do not sell early.

Robinhood sends you a notification before expiration if you own calls that are in the money, giving you a chance to sell or exercise manually. But if you do nothing, the automatic exercise happens, and you end up owning stock you may not have intended to buy. To avoid this, set a reminder to check your positions on expiration Friday, or sell your calls a day or two before expiration ends.

Robinhood's options trading rules and limits

Robinhood has a few restrictions on options trading. You must have at least $2,000 in your account to trade options at all — this is a regulatory requirement, not a Robinhood rule. You also cannot buy calls on every stock; Robinhood only offers options on stocks and ETFs that have enough trading volume to support an active options market.

If you are a new options trader, Robinhood may start you with "Level 1" options approval, which only lets you buy calls and puts. As you gain experience, you can request higher approval levels that unlock selling calls, spreads, and other advanced strategies. To request a higher level, go to Account Settings, find Options Approval Level, and submit a request.

There is no pattern day trader rule for options the way there is for stocks. You can buy and sell calls as many times as you want in a single day without triggering any restrictions. However, if your account falls below $2,000, Robinhood will freeze your options trading until you deposit more money.

Common mistakes to avoid when buying calls

The biggest mistake is buying calls that are too far out of the money and too close to expiration. A call that is $5 above the current stock price and expires in three days is extremely unlikely to make money, even though it looks cheap. The stock would need to jump 5% or more in three days just for you to break even. These trades lose money most of the time.

Another common error is not checking the bid-ask spread before you buy. Some options have a wide spread — meaning there is a big gap between what buyers will pay and what sellers want. If you buy at the ask price and immediately try to sell, you lose money just from the spread, even if the stock price does not move. Look for options with tight spreads (under $0.05) if you plan to trade in and out quickly.

A third mistake is forgetting about expiration and holding calls into the final day. Time decay accelerates in the last week before expiration, especially for out-of-the-money calls. A call that was worth $1.00 a week before expiration might be worth $0.10 on the final day, even if the stock price has not moved. Selling a few days early usually gets you a better price than waiting.

Frequently Asked Questions

Do I need to own the stock to buy a call on it?

No. Buying a call gives you the right to buy the stock later, but you do not need to own it first. You can buy a call on any stock Robinhood offers options for, regardless of whether you hold shares.

What is the difference between a call and a put?

A call gives you the right to buy a stock at a fixed price. A put gives you the right to sell a stock at a fixed price. Traders buy calls when they think a stock will rise and buy puts when they think it will fall.

Can I lose more than the premium I paid?

No. When you buy a call, the maximum loss is the premium you paid upfront. You cannot lose more than that amount, even if the stock price falls to zero. This is why buying calls is considered lower-risk than selling them.

How do I know which call to buy?

Start by deciding how much you want to spend and how much you think the stock will move. Calls closer to the current stock price cost more but have a better chance of profit. Calls further out in time cost more but give the stock longer to move. There is no perfect choice — it depends on your prediction and risk tolerance.

What does "in the money" mean?

A call is in the money when the stock price is above the strike price. For example, if you own a $50 call and the stock is trading at $55, your call is $5 in the money. In-the-money calls have real value and can be sold for a profit.