Let’s get real. Options trading sounds like the secret sauce of Wall Street pros — complex, risky, and honestly, kinda intimidating. But what if I told you that with Robinhood — yes, that sleek app on your phone — you can jump into options trading without needing a finance degree or losing your life savings?
If you’re scrolling through Robinhood right now, staring at those mysterious “Trade Options” buttons and wondering where to even start, this guide’s got you. We’ll break down options trading on Robinhood in simple, human terms. No jargon, no fluff. Just what you need to know to get started smart and keep your sanity.
Why Trade Options on Robinhood?
Robinhood revolutionized investing by making stocks easy and free. Now, it’s doing the same with options — letting you trade calls and puts right from your phone, with zero commission fees.
But — and this is important — options trading is NOT just another easy click. It’s a double-edged sword: huge profit potential but also serious risks. That’s why understanding the basics BEFORE you click that “Buy” button is crucial.
Step 1: Understand the Basics — What Are Options Anyway?
Options give you the right (not the obligation) to buy or sell a stock at a specific price within a set time. Think of it like reserving a concert ticket at today’s price, hoping the actual price goes up or down later so you can make a profit or avoid loss.
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Call Option: You bet the stock price will go UP.
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Put Option: You bet the stock price will go DOWN.
Easy, right? But remember, options have expiration dates. If you wait too long, your “ticket” can become worthless.
Step 2: Get Approved to Trade Options on Robinhood
Robinhood requires you to apply and get approved to trade options, mainly to protect newbies from reckless trading.
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Open Robinhood app
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Tap on your profile > Settings > Options Trading
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Fill out their questionnaire about experience, investment goals, and risk tolerance
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Wait for approval (usually quick)
Pro tip: Be honest. They want to make sure you know what you’re doing.
Step 3: Navigate to the Options Section on Robinhood
Once approved:
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Search for the stock or ETF you want
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Tap on it > Hit “Trade” > Then “Trade Options”
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You’ll see a colorful grid with various strike prices and expiration dates
This can look overwhelming, but here’s the secret: focus on the expiration date you want and strike prices close to the current stock price (called “at-the-money”).
Step 4: Picking Your First Trade — Call or Put?
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If you’re bullish (think stock price will rise), buy a call option
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If you’re bearish (think price will fall), buy a put option
Example: Tesla’s at $700, and you think it’ll jump to $750 next month. You could buy a call option with a $700 strike expiring next month.
Step 5: Understand the Price You’re Paying — The Premium
When you buy an option, you pay a premium — basically, the cost of your “ticket.” It’s influenced by time, volatility, and how close the strike price is to the stock price.
On Robinhood, you’ll see this clearly before you confirm your trade.
Step 6: Place Your Order — Market or Limit?
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Market Order: Buys the option immediately at the current price
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Limit Order: You set a max price, and the order fills only if the option hits that price
Beginners usually start with market orders because it’s simpler. Just be aware the price can fluctuate fast in volatile markets.
Step 7: Monitor Your Trade and Know When to Exit
Options can be like ticking time bombs. If your stock moves as expected, great! But time decay (Theta) eats away your option’s value every day.
On Robinhood, track your position closely:
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If profit hits your target, sell and lock it in
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If loss exceeds your risk tolerance, don’t be stubborn — cut losses
Step 8: Closing Your Option Position on Robinhood
To close:
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Tap your position
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Hit “Sell” or “Close”
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Confirm the details and submit
You can also let the option expire, but that means it becomes worthless if out-of-the-money — so usually, it’s better to close before expiration.
Bonus Tips for Trading Options on Robinhood
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Start Small: Don’t bet your rent money on your first trade
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Paper Trade First: Practice on other simulators before going live
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Learn the Greeks: Delta, Theta, Vega aren’t just fancy words — they explain how your option’s price moves
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Beware of Risk: Options can wipe you out fast if you’re not careful
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Use Stop Losses: Protect yourself by setting exit points in advance
Final Thoughts: Options on Robinhood Are Powerful — But Respect the Game
Robinhood makes options trading accessible, but that doesn’t mean it’s a game. The path to options success is paved with patience, education, and respect for risk. Don’t chase quick wins — build skills, read, watch, and trade small.
You don’t have to be a Wall Street wizard to trade options, but you DO have to be smart about it.
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