How to start trading options on Robinhood

To trade options on Robinhood, you must first turn on options trading in your account settings, then request approval from Robinhood. The platform offers three approval levels — Level 1 (covered calls and cash-secured puts), Level 2 (spreads), and Level 3 (naked calls and puts) — and you choose which level to request based on the strategies you want to use.

Once you have submitted your request, Robinhood reviews your application and notifies you of approval or denial within a few business days. If you are approved, you can begin placing options trades immediately. If you are denied, you can reapply after 30 days or contact Robinhood support to understand why your request was rejected.

Before you request approval, make sure your account meets Robinhood's minimum requirements: you must have at least $2,000 in account value and be at least 18 years old. Some approval levels also require trading experience or a certain account balance, which Robinhood will outline when you apply.

Key Takeaways

  • You must enable options trading in your account settings and request approval from Robinhood before you can place any options trade.
  • Robinhood offers three approval levels, each allowing different options strategies, so you should understand what you want to trade before you apply.
  • Your account must have at least $2,000 in value to be considered for any approval level.
  • Approval typically takes a few business days, and you can reapply 30 days after a denial if your circumstances change.

Understanding the three approval levels

Level 1 is the most basic and is often granted to new options traders. It allows you to sell covered calls (selling call options against stock you own) and sell cash-secured puts (selling put options while holding enough cash to buy the stock if assigned). These strategies are considered lower-risk because your downside is limited by the stock you own or the cash you hold.

Level 2 adds spreads to your toolkit. A spread is a trade where you buy and sell options at the same time to reduce your cost and cap your risk. Examples include bull call spreads, bear call spreads, and iron condors. Level 2 requires more trading knowledge and is typically granted to traders who demonstrate experience with Level 1 strategies.

Level 3 allows naked calls and puts — selling options without owning the underlying stock or holding cash to cover the position. This is the highest-risk level and requires the most experience. Robinhood is selective about Level 3 approval and may require a higher account balance or documented trading history.

When you request approval, you tell Robinhood which level you want. You do not have to start at Level 1 — you can request Level 2 or Level 3 directly — but Robinhood may deny your request if it judges your experience or account size insufficient for that level.

How to request options approval in your account

Open the Robinhood app or website and go to your Account settings. Look for the "Options" or "Investing" section, where you will see a toggle or button to enable options trading. Tap or click to turn it on.

After you enable options trading, Robinhood will prompt you to select an approval level and answer questions about your trading experience, investment goals, and risk tolerance. Answer honestly — Robinhood uses these responses to decide whether to grant your request. Overstating your experience or lying about your income can result in denial or account restrictions later.

Once you submit your request, you will see a confirmation screen. Robinhood will review your application and send you a notification (usually within 2 to 5 business days) telling you whether you were approved or denied. If approved, you can start placing options trades immediately. If denied, the notification will explain the reason, and you can reapply after 30 days.

What happens after you are approved

Once Robinhood approves your options request, your account will show an "Options" tab or section in the trading interface. You can search for any stock or exchange-traded fund (ETF) and see its available options contracts — calls and puts at different strike prices and expiration dates.

To place an options trade, select the contract you want, choose whether you are buying or selling, enter the number of contracts, and review the order before you submit it. Options on Robinhood trade during regular market hours (9:30 a.m. to 4 p.m. Eastern time) and during extended hours if you have that feature turned on. Each contract represents 100 shares of the underlying stock.

Keep in mind that options expire on a set date — usually the third Friday of each month for standard monthly options, though weekly options are also available. If you hold an options contract through its expiration date and it is "in the money" (profitable), Robinhood will automatically exercise it, which means you will buy or sell the underlying stock. If it is "out of the money" (unprofitable), it will expire worthless and you will lose your investment.

Common reasons Robinhood denies options approval

Robinhood denies options requests most often because the account balance is below $2,000 or the applicant has no trading experience. If you are new to investing, Robinhood may ask you to complete a few stock trades first to demonstrate you understand how markets work before approving options trading.

Another common reason is inconsistency between your stated experience and your account history. If you say you have been trading for five years but your account shows activity for only three months, Robinhood may deny your request. Similarly, if you request Level 3 approval but have never placed a Level 1 or Level 2 trade, denial is likely.

Age and citizenship also matter. You must be at least 18 years old and a U.S. citizen or permanent resident to trade options on Robinhood. If your account does not meet these requirements, you will be denied regardless of your experience or account balance.

Risks and costs of options trading on Robinhood

Options trading carries significant risk. Unlike buying stock, where your loss is limited to what you paid, selling options can expose you to losses larger than your initial investment. For example, if you sell a naked call and the stock price rises sharply, your loss is theoretically unlimited. Even covered calls and cash-secured puts can result in losses if the stock moves against you.

Robinhood does not charge a commission to trade options, but you will pay the bid-ask spread — the difference between the price at which you can buy and the price at which you can sell. On liquid options (those with high trading volume), the spread is usually small. On illiquid options, the spread can be wide, meaning you lose money just by entering and exiting the trade.

Options also decay in value as they approach expiration, a process called theta decay. If you buy an option and the stock does not move, you can still lose money simply because time is passing. This is why options trading requires active management and is not a "set and forget" strategy like buying and holding stock.

Frequently Asked Questions

Can I trade options if I have less than $2,000 in my account?

No. Robinhood requires a minimum account balance of $2,000 to request options approval. If your account is below that amount, you will need to deposit more money before you can apply. Once you are approved, you can trade options even if your balance later drops below $2,000, but you cannot request approval in the first place without meeting the minimum.

What is the difference between buying and selling options?

When you buy an option, you pay a premium upfront and your loss is limited to that premium. When you sell an option, you receive a premium upfront but you take on the obligation to buy or sell the underlying stock if the option is exercised. Selling options can result in losses larger than your initial investment, which is why it requires higher approval levels.

How long does it take to get options approval?

Robinhood typically reviews options requests within 2 to 5 business days. Some approvals are instant, especially if you request Level 1 and meet all the requirements. If you are denied, you can reapply after 30 days. Contacting Robinhood support does not speed up the review process.

What happens if my options contract expires while I am holding it?

If your contract is in the money at expiration, Robinhood will automatically exercise it, meaning you will buy or sell the underlying stock at the strike price. If it is out of the money, it will expire worthless and you will lose your investment. You can also close (sell) your contract before expiration to lock in a profit or limit a loss.

Can I trade options during extended hours on Robinhood?

No. Options on Robinhood trade only during regular market hours (9:30 a.m. to 4 p.m. Eastern time). You cannot place options trades during pre-market or after-hours sessions, even if you have extended hours trading turned on for stocks.