Selling options on Robinhood means writing a contract that gives someone else the right to buy or sell a stock at a price you set, by a date you set — and you keep the premium they pay upfront

When you sell an option, you are the one on the hook if the buyer decides to exercise it. If you sell a call option on Apple stock at $150, and Apple jumps to $180, the buyer will almost certainly exercise — and you have to sell them 100 shares at $150 each, even though the stock is worth $180. If you sell a put option at $150 and Apple falls to $120, the buyer will exercise and you have to buy 100 shares at $150 each. You keep the premium no matter what, but your loss can be much larger than what you collected.

Robinhood requires you to enable options trading on your account, choose an approval level, and then use the options chain to place a sell order. The process takes about five minutes once you are approved.

Key Takeaways

  • You must request options approval in your Robinhood account settings; approval is usually instant but depends on your account type and history.
  • Robinhood offers three approval levels: covered calls and cash-secured puts only; spreads and other multi-leg strategies; and naked calls and puts with no collateral requirement.
  • To sell an option, find the stock in the app, tap the options chain, select the strike price and expiration date you want, and swipe left on the bid price to place a sell order.
  • Your maximum loss on a covered call is limited to the premium you keep; your maximum loss on a naked put is theoretically unlimited if the stock falls to zero.
  • Robinhood holds the premium in your account immediately, but the contract remains open until expiration or the buyer exercises it.

Request options approval in your account settings

Open Robinhood, tap the account icon at the bottom right, scroll to "Account Settings," and look for "Options Approval." Tap it and you will see three levels. Robinhood usually approves you for at least Level 1 within seconds, though it can take up to a business day if your account is new or has limited history.

Level 1 lets you sell covered calls (calls backed by shares you own) and cash-secured puts (puts backed by cash in your account equal to the strike price times 100). These are the lowest-risk strategies from Robinhood's perspective because your loss is capped.

Level 2 adds spreads and other multi-leg strategies — for example, selling a call and buying a call at a higher strike on the same stock and expiration. Approval for Level 2 usually requires a minimum account balance and some trading history.

Level 3 lets you sell naked calls and puts with no collateral requirement. Robinhood is much more selective here and may deny you or require a higher account balance. Most individual traders do not need Level 3.

Understand what collateral you need before you sell

If you sell a covered call, you must own 100 shares of the stock for each contract you sell. Robinhood will not let you place the order without them. The shares stay in your account and you keep them if the option expires worthless; if the buyer exercises, Robinhood sells your shares at the strike price automatically.

If you sell a cash-secured put, Robinhood sets aside cash equal to the strike price times 100. If you sell a $50 put on XYZ stock, Robinhood locks up $5,000 in your account. You cannot spend that cash while the contract is open. If the buyer exercises, Robinhood uses that cash to buy 100 shares at the strike price. If the contract expires worthless, the cash is released back to you.

If you sell a naked call or put (Level 3 only), you do not need to own shares or set aside cash upfront. But your loss is uncapped — if a call is exercised and you do not own the shares, Robinhood will buy them at market price to deliver them, no matter how high the price has climbed. This is why naked selling is risky and why Robinhood requires higher account balances and approval.

Find the options chain and place a sell order

Search for the stock in Robinhood and tap it. Below the price chart, tap "Options." You will see a chain of available contracts organized by expiration date and strike price. The columns show the bid price (what buyers will pay you), the ask price (what sellers want), and the Greeks — delta, gamma, theta, and vega — which measure how the option price moves with the stock.

Tap the expiration date you want, then scroll to the strike price. Tap the strike and you will see two prices: the bid and the ask. To sell, you want the bid price — that is what you will receive. Tap the bid price and a sell order form appears. Confirm the number of contracts (usually 1), review the order, and swipe left to submit.

Your order goes to the market and will fill when a buyer accepts your price. If no one bids at your price, you can lower it (move closer to the ask) to fill faster, or wait for the market to move. Once the order fills, the premium appears in your account as cash, and the contract is open until expiration or exercise.

Monitor your open positions and manage risk

After you sell an option, Robinhood shows it in your "Open Orders" and then in "Positions" once it fills. You can see the current value of the contract (what it would cost to buy it back), your profit or loss, and how many days until expiration. As the stock price moves, the option value changes — if the stock moves in your favor, the contract loses value and you can buy it back for less than you sold it, locking in profit early.

Many traders close winning positions before expiration rather than wait for the contract to expire worthless. If you sold a call for $2 and it is now worth $0.50, you can buy it back for $0.50, keep the $1.50 difference, and free up your collateral or shares. Tap the position, tap "Close," and confirm the buyback order.

If the stock moves against you, the contract gains value. If you sold a call and the stock rallies hard, the call might be worth $5 even though you only collected $2 in premium. You can still close it and take the loss, or hold and hope the stock falls back before expiration. If you hold until expiration and the option is in the money, the buyer will exercise and you will be assigned — your shares will be sold (for a call) or you will be forced to buy shares (for a put).

Know the tax and assignment rules

When you sell an option, the premium is taxable income in the year you receive it. If you close the position before expiration, any gain or loss on the buyback is a capital gain or loss. If you are assigned (the buyer exercises), the assignment is treated as a stock sale or purchase at the strike price, and you owe capital gains tax on any profit.

Assignment happens automatically after market close on the day the option expires in the money. If you sold a call and the stock closed above the strike, you will be assigned and your shares will be sold at the strike price the next morning. If you sold a put and the stock closed below the strike, you will be assigned and 100 shares will be bought at the strike price. Robinhood handles the mechanics; you just see the shares leave or arrive in your account.

Keep records of all your option trades — the premium you collected, the strike price, the expiration date, and whether you closed early or were assigned. Your tax software or accountant will need this to calculate your gains and losses correctly.

Frequently Asked Questions

What is the difference between the bid and ask price for an option?

The bid is what buyers will pay you right now; the ask is what sellers want. When you sell, you receive the bid. The difference between them is the spread. On liquid stocks with many traders, the spread is tight (maybe $0.05); on less-traded stocks, it can be wide ($0.50 or more), making it harder to fill your order at a good price.

Can I sell an option and then buy it back before expiration?

Yes. You can close any open position by buying it back at any time before expiration. If the option has lost value, you profit on the difference. If it has gained value, you take a loss. This is called "closing the position" and it frees up your collateral or shares immediately.

What happens if I do not have enough cash or shares to cover an assignment?

Robinhood will not let you sell an option unless you have the collateral. If you sell a covered call, you must own the shares. If you sell a cash-secured put, you must have the cash. If you somehow end up short on assignment day, Robinhood will use margin (borrowed money) to cover the gap, and you will owe interest on the loan.

Do I pay a commission to sell options on Robinhood?

No. Robinhood does not charge commissions on options trades. You keep the full premium you collect, minus the bid-ask spread. Some brokers charge $0.65 per contract, so Robinhood's zero-commission model is one reason traders use it for options.

What does "theta" mean and why do I want it to be positive?

Theta is the rate at which an option loses value as time passes, all else equal. When you sell an option, you want theta to be positive (for you, the seller) because it means the option decays in value every day. If you sold a call for $2 and theta is $0.05 per day, the option loses $0.05 in value each day just from time passing, even if the stock price does not move. This is why selling options benefits from time decay.