How to place your first options trade on Robinhood
To buy an option on Robinhood, you search for the stock, tap the option chain, choose your contract (call or put, strike price, expiration date), enter the number of contracts, review the price, and confirm the order. The whole process takes about two minutes once you know where to look. Robinhood shows you the bid-ask spread and lets you see what you'll pay before you commit.
Your account must have options trading turned on. Robinhood grants this in tiers — Level 1 lets you buy calls and puts, Level 2 adds spreads, Level 3 adds naked calls. Most new accounts start at Level 1. If you don't see the options tab when you search a stock, you need to request higher permissions in the Account settings under Investing.
You also need enough cash or buying power in your account to cover the trade. One contract controls 100 shares, so if a call costs $2 per share, you'll need $200 buying power. Robinhood will reject the order if you don't have it.
Key Takeaways
- Search the stock ticker, tap the options tab, and select the specific contract you want — call or put, strike price, and expiration date all matter.
- One options contract represents 100 shares, so a $2 contract costs $200 to buy.
- Your account needs options Level 1 permission, which you can request in Account settings if you don't already have it.
- Robinhood shows you the bid-ask spread and the exact cost before you confirm, so you can see what you're paying.
- Options expire on a set date — if you don't sell or exercise before expiration, the contract becomes worthless or is automatically exercised.
Understanding the options chain and how to read it
When you tap the options tab on a stock, Robinhood displays the options chain — a table showing every available contract for that stock. Each row is a different strike price. The columns show calls on the left and puts on the right, with bid price, ask price, and expiration date.
The bid is what buyers will pay right now; the ask is what sellers want. When you buy, you pay the ask. The gap between them is the spread. A narrow spread (like $0.05) means the contract trades often and you won't lose much to the gap. A wide spread (like $0.50) means fewer traders are interested, and you'll pay more to enter and more to exit.
The strike price is the price at which you can buy (call) or sell (put) the stock if you exercise. A call with a $100 strike on a $102 stock is already worth something because you could buy at $100 and sell at $102. A call with a $110 strike on a $102 stock is worth less because the stock would have to rise first.
The expiration date appears at the top of each column. Most stocks have options expiring weekly (Friday), monthly (third Friday), and sometimes quarterly. Contracts closer to expiration move faster in price and lose value more quickly if the stock doesn't move.
Calls versus puts: which one to buy
A call is a bet that the stock will rise. You buy a call when you think the price will go up before the expiration date. If it does, the contract gains value and you can sell it for a profit. If the stock falls or stays flat, the call loses value.
A put is a bet that the stock will fall. You buy a put when you think the price will drop. If it does, the put gains value. If the stock rises or stays flat, the put loses value.
Both are bets on direction and timing. You're not forced to own the stock — you're buying the right to own it (call) or sell it (put) at a fixed price. Most traders close the position by selling the contract before expiration rather than exercising it.
Placing the order and what happens next
Once you've chosen your contract, tap it to open the order screen. Robinhood shows you the current bid and ask, and a box where you enter the number of contracts. Start with 1 if you're new. Tap Review Order to see the total cost and the bid-ask spread.
The order type defaults to market, which means Robinhood will fill it at the current ask price when ready. You can switch to limit order if you want to name your own price — useful if the spread is wide and you want to wait for a better rate. A limit order may not fill if the price doesn't reach your target before market close.
Tap Confirm to send the order. If it fills, you'll see the contract in your positions. The value updates in real time as the stock price moves. You can sell the contract anytime during market hours by tapping it and selecting Sell.
Options expire at 4 p.m. ET on their expiration date. If you still own an in-the-money contract (a call below the stock price, or a put above it) at expiration, Robinhood will automatically exercise it, meaning you'll own 100 shares of the stock. If it's out-of-the-money, it expires worthless and you lose what you paid.
Common mistakes to avoid when buying options
Buying too many contracts at once is the most expensive mistake. One contract is 100 shares' worth of exposure. If you buy 10 contracts on a $50 stock, you're controlling $50,000 of stock movement with a much smaller cash outlay. A 10% move in the stock can wipe out your entire premium or double it. Start with 1 contract and scale up only after you've watched a few trades.
Ignoring the bid-ask spread will cost you money on entry and exit. On a thinly traded option, the spread might be $0.50 or more. That's real money lost to the gap. Check the spread before you buy, and avoid options with spreads wider than 5% of the ask price.
Holding through expiration by accident is avoidable. Set a calendar reminder for the day before expiration if you don't want to own the stock. Robinhood will exercise in-the-money contracts automatically, and you'll suddenly own 100 shares you didn't plan to buy.
Buying options on stocks with low trading volume often means wide spreads and slow fills. Stick to major stocks and ETFs where options trade constantly. The bid-ask spread will be tighter and you'll get better prices.
How options pricing works on Robinhood
The price of an option depends on four things: how far the stock is from the strike price, how much time is left until expiration, how volatile the stock is, and the overall interest rate environment. Robinhood doesn't show you all these inputs, but you'll see the effects.
An option closer to expiration loses value faster if the stock doesn't move. A call on a stock that's been flat for a week will be cheaper on Friday than it was on Monday, even if nothing else changed. This is called time decay.
An option on a volatile stock costs more than an option on a stable stock at the same strike and expiration. Robinhood factors this in automatically when it shows you the bid and ask.
The bid-ask spread widens when the stock moves sharply or when few traders are interested in that particular contract. You'll see the spread tighten during the busiest hours of the trading day (9:30 a.m. to 4 p.m. ET) and widen outside those hours.
Closing a position or letting it expire
To close a position, tap the contract in your positions list and select Sell. Robinhood will show you the current bid and ask. You can sell at market (when ready fill at the ask) or set a limit price. Most traders sell at market to get out quickly.
If you sell before expiration, you pocket the difference between what you paid and what you sold it for. This is how most options trades end — you never own the stock, you just profit (or lose) on the contract itself.
If you hold until expiration and the contract is in-the-money, Robinhood exercises it automatically after market close. You'll own 100 shares the next morning. If it's out-of-the-money, it expires worthless and you lose your entire premium.
Frequently Asked Questions
Do I need a minimum account balance to trade options on Robinhood?
Robinhood doesn't enforce a minimum, but you need enough buying power to cover the cost of the contract. One contract costs 100 times the per-share price. If a call costs $2, you need $200 available. Margin accounts can borrow, but cash accounts cannot.
What happens if I don't have enough buying power when I try to buy?
Robinhood will reject the order and show you an error message. You'll need to deposit more cash or close another position to free up buying power. The order won't go through until you have enough.
Can I buy options after hours on Robinhood?
No. Options trading is only available during regular market hours, 9:30 a.m. to 4 p.m. ET on weekdays. You can place orders outside those hours, but they'll be queued and filled when the market opens.
What's the difference between buying a call and buying a stock?
Buying a call costs much less upfront but expires on a set date. Buying the stock costs more but you own it indefinitely. A call on a $100 stock might cost $2 (you pay $200 for one contract), while the stock itself costs $10,000. If the stock rises to $110, your call might be worth $10, a 400% gain. But if the stock is still $100 at expiration, your call expires worthless.
Can I sell an option I bought without owning the stock?
Yes. Most options traders sell the contract before expiration rather than exercising it. You buy the contract, the stock moves in your favor, and you sell it for a profit. You never own the stock itself.