Opening an Options Account and Getting Approval

Robinhood does not let you trade options with a regular stock account. You have to request options trading access through the app, and Robinhood assigns you a level based on your experience and account size. The process is not automatic — you fill out a form, Robinhood reviews it, and you get approved or denied within a few business days.

To request access, open the Robinhood app, go to Account, then Investing, then Options. You will answer questions about your trading experience, annual income, and net worth. Robinhood uses these answers to decide which options level to grant you. Level 1 lets you buy calls and puts only. Level 2 adds covered calls and cash-secured puts. Level 3 and higher allow spreads and other complex strategies. Most new traders start at Level 1 or 2.

Approval is not may provide. If Robinhood thinks you lack experience or have insufficient funds, it may deny your request or offer a lower level than you asked for. You can reapply after 30 days if denied. Once approved, options trading becomes available in your account immediately.

Key Takeaways

  • You must request options trading access separately from your stock account, and Robinhood assigns you a level based on your answers about experience and net worth.
  • Level 1 allows only buying calls and puts; higher levels unlock covered calls, spreads, and other strategies.
  • Options contracts on Robinhood represent 100 shares of the underlying stock, so one contract costs roughly 100 times the quoted price.
  • You can place an options order during market hours or submit it to open at the next market open, and you can close the position before expiration or let it expire.
  • Options expire on a set date, and if you hold a call or put through expiration, Robinhood will exercise it automatically if it is in the money.

Finding and Selecting an Options Contract

Once approved, you search for an options contract the same way you search for a stock. Type the company name or ticker into the search bar. When the stock page opens, scroll down and tap the Options tab. You will see a list of expiration dates — these are the dates the contract ends and stops trading.

Tap an expiration date to see all the contracts available for that date. You will see two columns: calls on the left and puts on the right. Each row is a different strike price — the price at which you can buy (for a call) or sell (for a put) the underlying stock. The rightmost column shows the price of the contract, called the premium. This is what you pay per share, so multiply it by 100 to get the total cost.

For example, if a call contract shows a premium of $2.50, you pay $250 total ($2.50 × 100 shares). The bid-ask spread — the gap between what buyers will pay and what sellers will accept — is usually wider for options than for stocks, especially for less popular contracts. Contracts that expire soon or are far from the current stock price often have wider spreads and are harder to trade.

Placing a Buy Order for an Options Contract

Tap the contract you want to buy. A panel opens showing the bid price, ask price, and a text box where you enter the number of contracts. One contract equals 100 shares. If you enter 1, you are buying the right to buy or sell 100 shares at the strike price. If you enter 5, you are buying 500 shares' worth of exposure.

Below the quantity box, you choose your order type. Robinhood defaults to market order, which buys at the current ask price immediately. You can also place a limit order, which lets you name the price you are willing to pay. A limit order may not fill if the price never drops to your limit, but it protects you from overpaying. For options, limit orders are often the better choice because premiums move quickly and the bid-ask spread can be large.

After you set the order type and quantity, tap Review and then Confirm. The order goes to the market. If it is a market order, it fills within seconds during market hours. If it is a limit order, it waits until someone sells at your price or until you cancel it. You can see all open orders in the Orders tab at the bottom of the app.

Closing or Holding an Options Position

Once you own a contract, you can close it anytime before expiration by selling it back. Open the contract in your portfolio, tap Sell, choose your order type (market or limit), and confirm. You receive the current premium minus any fees. The difference between what you paid and what you sold it for is your profit or loss.

If you do nothing and hold the contract through its expiration date, Robinhood handles it automatically. If your call or put is in the money — meaning it has intrinsic value — Robinhood will exercise it for you. For a call, that means you buy 100 shares at the strike price. For a put, you sell 100 shares at the strike price. If the contract is out of the money — worthless — it expires and disappears from your account. You lose the premium you paid.

Automatic exercise can create unexpected stock positions or cash outflows. If you own a call on Apple at a $150 strike and Apple closes at $155 on expiration day, Robinhood will buy 100 shares of Apple for you at $150 per share, using $15,000 of your cash. Make sure you have the cash available or understand the consequences before you hold through expiration.

Understanding Bid-Ask Spreads and Liquidity

The bid is the highest price a buyer will pay right now. The ask is the lowest price a seller will accept. When you buy, you pay the ask. When you sell, you receive the bid. The difference is the spread, and it is your immediate cost just for entering and exiting the trade.

Spreads are wider for options than for stocks because options are less liquid — fewer people trade them. A popular call on a major stock might have a spread of $0.05. A call on a small-cap stock or one that expires in a week might have a spread of $0.50 or more. Before you buy, look at the bid-ask spread and ask yourself whether the trade is worth that cost. If the spread is very wide, you may want to use a limit order and wait, or skip the trade entirely.

Margin, Buying Power, and Account Requirements

Buying a call or put uses cash from your account. If you buy one contract for $250, you need $250 in cash. Robinhood calls this amount buying power. You can see your available buying power in the Account tab.

If you have a margin account with Robinhood, you can borrow money to trade options, but the rules are strict. Robinhood requires a minimum account balance of $2,000 to use margin at all. Some options strategies, like selling covered calls or cash-secured puts, require you to hold the underlying stock or cash as collateral. Robinhood will reserve that amount and prevent you from using it elsewhere. If your account value drops below $2,000, Robinhood will restrict your trading until you deposit more money.

Common Mistakes and How to Avoid Them

One of the biggest mistakes is not understanding that one contract equals 100 shares. A trader sees a $2 premium and thinks they are spending $2, then discovers they owe $200. Always multiply the premium by 100 before you confirm the order.

Another mistake is holding through expiration without realizing what will happen. If you buy a call and forget about it, and the stock rises, Robinhood will automatically buy 100 shares for you. If you do not have the cash, your account will go negative or the trade will fail. Set a reminder to close or manage your position at least one day before expiration.

A third mistake is using market orders on illiquid options. If the bid-ask spread is wide and you use a market order, you will buy at the ask and immediately lose money to the spread. Use a limit order instead, even if it means waiting or not filling at all. It is better to miss a trade than to overpay.

Frequently Asked Questions

Can I trade options before the market opens or after it closes?

No. Options trading on Robinhood is only available during regular market hours, 9:30 a.m. to 4 p.m. Eastern time, Monday through Friday. You can place an order to open at the next market open, but you cannot trade options in pre-market or after-hours sessions.

What happens if I sell a call or put I do not own?

You cannot sell options you do not own on Robinhood unless you have Level 2 or higher approval and the strategy is covered. Level 1 only allows you to buy calls and puts. Selling naked calls or puts requires higher approval levels and carries significant risk.

Can I close an options position on the day it expires?

Yes. You can close a position anytime during market hours, including on the expiration date. In fact, it is often a good idea to close a position before the final hour of trading on expiration day, because liquidity drops and spreads widen. After 4 p.m. on expiration day, Robinhood will exercise any in-the-money contracts automatically.

What fees does Robinhood charge for options trading?

Robinhood does not charge a commission per trade. However, you pay the bid-ask spread when you enter and exit, and you may pay regulatory fees on certain closing trades. The spread is the main cost of options trading on Robinhood.

Do I need a certain amount of money to start trading options?

There is no minimum to request Level 1 approval, but Robinhood may deny your request if your account is very small or you have no trading experience. Once approved, you need enough cash to cover the premium of the contract you want to buy. One contract typically costs between $50 and $500, depending on the stock and strike price.