How to start trading options on Robinhood
To trade options on Robinhood, you first need to request options access through your account settings, then wait for approval. Robinhood grants options access in tiers — Level 1 (covered calls and cash-secured puts), Level 2 (spreads), and Level 3 (naked calls and puts) — and you must meet the account requirements for each level before you can trade those strategies.
Start by opening the Robinhood app or website and going to Account > Settings > Options. Select the level of options trading you want and answer the questions about your investment experience and financial situation. Robinhood reviews your request and typically responds within one business day, though approval is not automatic. Your account balance, trading history, and answers to their questions all factor into the decision.
Once approved, you can begin placing options trades when ready. Options contracts on Robinhood trade during regular market hours (9:30 a.m. to 4 p.m. ET on weekdays) and during extended hours if you have that feature turned on. Each options contract represents 100 shares of the underlying stock.
Key Takeaways
- Options access requires a request through your account settings and approval from Robinhood, which typically takes one business day.
- Robinhood offers three levels of options trading, each allowing different strategies — Level 1 is the most restrictive and Level 3 allows the riskiest trades.
- Each options contract controls 100 shares, so a contract price of $2 costs $200 to buy ($2 × 100).
- You can trade options during regular market hours and extended hours if that feature is enabled on your account.
Understanding the three options approval levels
Level 1 allows you to sell covered calls (selling the right to buy stock you already own) and sell cash-secured puts (selling the right to buy stock at a set price, with cash set aside to buy it if assigned). These are considered lower-risk because you either own the underlying stock or have cash reserved. Most new options traders start here.
Level 2 adds spreads — buying and selling options at the same time to limit your risk and potential profit. A bull call spread, for example, means buying a call at one price and selling a call at a higher price. Spreads reduce the amount you can lose compared to buying or selling a single option.
Level 3 allows naked calls and puts — selling options without owning the stock or having cash set aside. This is the riskiest level because your losses can theoretically be unlimited. Robinhood requires higher account balances and more trading experience before granting Level 3 access.
Your account balance matters for approval. Robinhood does not publish exact minimums, but accounts with higher balances and longer trading histories are approved more often. If you are denied, you can request again after 30 days.
How to place your first options trade
Once approved, search for the stock you want to trade options on in the Robinhood app. Tap the stock name to open its detail page, then scroll down and tap "Trade Options." You will see a list of available contracts — calls and puts, organized by expiration date and strike price.
A call is a contract that gives you the right to buy stock at a set price (the strike price) before a certain date (the expiration date). You buy a call if you think the stock price will go up. A put is a contract that gives you the right to sell stock at a set price. You buy a put if you think the stock price will go down.
Select the contract you want — for example, a call expiring in two weeks with a strike price of $150. The app shows you the current bid price (what buyers will pay) and ask price (what sellers want). Tap "Buy" or "Sell" depending on whether you are opening a new position or closing an existing one. Enter the number of contracts (each contract = 100 shares) and review the total cost or credit before confirming.
Your order goes to the market when ready. If the bid and ask prices are close, it will likely fill within seconds. If they are far apart, your order may sit unfilled until the price moves or you cancel it.
What happens when an options contract expires
Every options contract has an expiration date — the last day you can trade it or exercise it. On Robinhood, most stock options expire on Fridays at 4 p.m. ET. If you still own a call or put at expiration, one of three things happens: the contract expires worthless (you lose your investment), it is exercised automatically (you are forced to buy or sell the underlying stock), or you close it before expiration by selling it back.
If you own a call and the stock price is above the strike price at expiration, Robinhood will automatically exercise it — you will buy 100 shares at the strike price. If you own a put and the stock price is below the strike price, Robinhood will automatically exercise it — you will sell 100 shares at the strike price. This happens even if you do not have the cash or shares available, so Robinhood may use margin or force a sale to cover the position.
To avoid automatic exercise, close your position before expiration by selling the contract back. This locks in your profit or loss and gives you control over what happens next. Many traders close positions the day before expiration to avoid surprises.
Common mistakes to avoid when trading options
The biggest mistake is forgetting that each contract controls 100 shares. A call priced at $3 costs $300 to buy, not $3. New traders often underestimate how much money they are risking and end up with positions larger than they intended.
Another common error is holding options too close to expiration. Options lose value quickly in the final days before expiration, especially if they are out of the money (the stock price is below the strike for a call, or above the strike for a put). Selling a week or two before expiration often locks in more profit than waiting until the last day.
Traders also sometimes ignore the bid-ask spread — the gap between what buyers will pay and what sellers want. A wide spread means you lose money the moment you buy because you are paying more than the current market price. Check the spread before placing a trade, especially on less popular stocks or far-out expiration dates.
Finally, many traders do not have a plan for what to do if the trade goes against them. Decide in advance whether you will close the position at a certain loss, hold until expiration, or roll the contract to a later date. Without a plan, emotions often lead to worse decisions.
How options pricing works on Robinhood
The price of an options contract depends on five main factors: the stock price, the strike price, the time until expiration, how much the stock price moves (volatility), and interest rates. Robinhood shows you the current bid and ask prices, but understanding what drives those prices helps you spot good trades.
An in-the-money option (one that would make money if exercised today) costs more than an out-of-the-money option (one that would lose money if exercised today). A call is in the money if the stock price is above the strike price. A put is in the money if the stock price is below the strike price.
Time decay works against you if you own an option — as expiration approaches, the contract loses value even if the stock price does not move. This is why options traders often sell contracts a few weeks before expiration rather than holding until the last day. If you sell an option, time decay works in your favor.
Volatility — how much the stock price swings — also affects price. When a stock is volatile, options cost more because there is a bigger chance the contract will end up in the money. When volatility is low, options cost less.
Frequently Asked Questions
Do I need a minimum account balance to trade options on Robinhood?
Robinhood does not publish a specific minimum, but accounts with higher balances are approved more often. Most traders report being approved with balances of $500 to $2,000, though approval depends on your answers about experience and financial situation, not just your balance.
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. ET on weekdays. Extended hours trading is available for stocks but not for options contracts.
What happens if I do not have enough cash to cover an automatic exercise?
Robinhood will use margin (borrowed money) to cover the exercise if you have margin enabled on your account. If you do not have margin, Robinhood will force-sell other positions in your account to raise the cash. To avoid this, close your position before expiration or make sure you have cash set aside.
Can I sell options I do not own on Robinhood?
Yes, but only if you have Level 2 or Level 3 approval. Level 2 allows spreads (selling an option while buying another to limit risk). Level 3 allows naked calls and puts (selling without owning the stock or having cash set aside). Level 1 does not allow any selling without owning the underlying position.
How long does it take for an options trade to settle on Robinhood?
Options trades settle the next business day, but you can use the proceeds to buy other securities when ready. The cash from selling an option is available right away, even though the trade does not officially settle until the next day.