How to place your first options trade on Robinhood

To trade options on Robinhood, you need a funded account with at least $2,000 in buying power, and you must request options approval from Robinhood itself — the app does not grant it automatically. Once approved, you search for the stock or ETF you want, tap the options chain, pick an expiration date and strike price, choose buy or sell, set your price, and submit the order. The order sits in the queue until another trader accepts your price or the market closes.

Robinhood does not charge a commission on options trades, but you pay the bid-ask spread — the difference between what buyers will pay and what sellers will accept. On liquid stocks like Apple or Tesla, this spread is often just a few cents. On less-traded options, the spread can be wider, meaning you lose money the moment you enter the trade.

Before you place a real trade, paper trade first. Robinhood's paper trading mode lets you practice with fake money so you can see how orders fill, how the Greeks move, and what happens when the stock price shifts. This costs nothing and takes the pressure off your first few trades.

Key Takeaways

  • You must request options approval from Robinhood and maintain at least $2,000 in buying power before you can trade any options contract.
  • Options trades on Robinhood have no commission, but you pay the bid-ask spread, which varies depending on how many traders are buying and selling that contract.
  • Paper trading mode lets you practice options trades with fake money so you understand how orders work before risking real cash.
  • Each options contract controls 100 shares of the underlying stock, so buying one call or put means you are controlling a $5,000 position in a $50 stock.
  • Robinhood closes most options positions automatically on the day of expiration if they are in the money, which can lock in losses or gains you did not expect.

Requesting options approval from Robinhood

Open the Robinhood app, tap the Account icon at the bottom right, scroll to Investing, and select Options. Robinhood will show you the approval levels available. Level 1 lets you buy calls and puts only. Level 2 adds covered calls and cash-secured puts. Level 3 adds spreads. Level 4 adds margin-based strategies. Most new traders start with Level 1.

Robinhood usually approves Level 1 requests within minutes or hours. Higher levels may take longer because Robinhood wants to see your trading history and net worth. You do not need to have traded options before — Robinhood bases approval on your account age, balance, and answers to their questionnaire about your experience.

Once approved, your options approval level stays active as long as your account is open. You can request a higher level later if you want to trade spreads or other strategies.

Understanding the options chain and how to read it

When you tap Options on a stock, Robinhood shows you the options chain — a table of every call and put available for that stock, organized by expiration date and strike price. The columns show the bid price (what buyers will pay), the ask price (what sellers want), the last price (the most recent trade), and the Greeks — Delta, Gamma, Theta, and Vega — which measure how the option price moves.

Pick an expiration date first. Robinhood lists dates from nearest to farthest. A call or put expiring in one week is riskier but cheaper than one expiring in three months. Then pick a strike price. A call strike below the current stock price is in the money and costs more. A call strike above the stock price is out of the money and costs less but needs the stock to rise for you to profit.

The bid-ask spread tells you the real cost of entry. If a call shows a bid of $2.50 and an ask of $2.65, you will pay $2.65 to buy it immediately, or receive $2.50 if you sell it immediately. That $0.15 spread is your cost just to enter the trade. On illiquid options, the spread can be $0.50 or wider, which makes small profits impossible.

Placing a buy or sell order for an options contract

Tap the call or put you want to trade. Robinhood shows you a preview of the order. At the top, choose Buy or Sell. For a buy order, Robinhood defaults to a limit order at the ask price — you can lower this price to try to save money, but your order may not fill. For a sell order, Robinhood defaults to the bid price.

Set your quantity. Remember that one options contract equals 100 shares. If you buy one call, you control 100 shares. If you buy five calls, you control 500 shares. Robinhood shows your total buying power required and the maximum loss if the trade goes against you.

Review the order and tap Confirm. Your order enters the queue. If the price you set matches what other traders are willing to pay or accept, your order fills immediately. If not, your order waits until the price moves to your level or the market closes. You can cancel an unfilled order at any time by tapping it in your Activity tab.

What happens when your options contract expires

Every options contract has an expiration date — the third Friday of the month for monthly options, or the Friday of the week for weekly options. On expiration day, Robinhood automatically closes any position that is in the money (profitable) at market close. If your call is in the money, Robinhood exercises it, and you receive 100 shares of the stock. If your put is in the money, Robinhood exercises it, and you sell 100 shares.

If your option expires out of the money (worthless), Robinhood lets it expire and removes it from your account. You lose the full amount you paid for the contract.

You can close any position before expiration by selling it back. This is usually smarter than holding to expiration because you avoid the automatic exercise and keep more control over your exit. Selling early also lets you lock in a profit or cut a loss before the final day.

Managing risk and avoiding common mistakes

The biggest mistake new options traders make is buying out-of-the-money calls or puts on the hope that the stock will move far and fast. These are the cheapest options, but they expire worthless most of the time. A $1 call that you buy for $0.10 needs the stock to rise more than $1.10 just to break even — and that has to happen before expiration.

Another common mistake is holding a winning trade too long. If you buy a call for $1 and it rises to $3, many traders wait for it to hit $5. But options lose value as expiration approaches, even if the stock stays flat. Selling at $3 locks in a real profit. Holding for $5 often ends with the option expiring worthless.

Set a stop loss before you enter any trade. Decide in advance how much you are willing to lose — say, 50% of what you paid — and close the position if it hits that level. This keeps emotions out of the decision and prevents small losses from becoming large ones.

Paper trade for at least a week before you risk real money. Watch how the Greeks change, how the bid-ask spread widens and narrows, and how fast your paper profits can vanish. This experience is worth far more than the cost of a few real losses.

Frequently Asked Questions

Do I need $2,000 in my account to trade options on Robinhood?

Yes. Robinhood requires a minimum of $2,000 in buying power to trade options. This is a Robinhood rule, not a federal rule, though the Financial Industry Regulatory Authority (FINRA) does set minimum account sizes for margin accounts. If your account falls below $2,000, you lose options trading until you deposit more.

What is the difference between buying a call and buying a put?

A call gives you the right to buy 100 shares at a fixed price. You buy a call when you think the stock will rise. A put gives you the right to sell 100 shares at a fixed price. You buy a put when you think the stock will fall. Both cost money upfront, and both expire worthless if the stock moves the wrong direction.

Can I sell options I do not own on Robinhood?

Yes, but only if Robinhood approves you for Level 2 or higher. Selling a call or put you do not own is called an open sale or naked sale. You collect the premium upfront, but your loss is unlimited if the stock moves against you. Most new traders should not attempt this until they understand the risks.

What happens if I do not have enough cash to exercise an option?

If a call you own expires in the money and you do not have enough cash to buy 100 shares, Robinhood will not exercise it. Instead, Robinhood sells the call back at market price on expiration day and deposits the proceeds in your account. You avoid the forced purchase, but you also miss any profit above the sale price.

Can I trade options after hours on Robinhood?

No. Robinhood only lets you place options orders during regular market hours, 9:30 a.m. to 4 p.m. Eastern Time, Monday through Friday. You can view your positions and the options chain after hours, but you cannot buy or sell until the market opens the next day.