The Basic Steps to Place an Options Trade

To trade options on Robinhood, you first need to request options access in your account settings, then choose a stock, select the contract type and expiration date you want, and place your order. Robinhood does not grant options access automatically — you have to ask for it, and the app will ask you a few questions about your experience before approving you.

Once you have access, open the Robinhood app, search for the stock whose options you want to trade, and tap the "Options" tab below the stock price. You will see a list of available contracts organized by expiration date. Each row shows the strike price (the price at which you can buy or sell the stock), the bid and ask prices for that contract, and the Greeks — numbers that show how the contract's price moves with the stock.

Tap the contract you want, choose whether you are buying or selling, enter the number of contracts, and review the total cost or credit before you submit. The order goes to the market when ready, and Robinhood will show you a confirmation with your order number.

Key Takeaways

  • You must request options access in your account settings before you can place any options trade, and Robinhood will ask about your trading experience.
  • Options are listed by expiration date and strike price, and you choose whether you are buying to open, selling to open, buying to close, or selling to close a position.
  • The bid-ask spread — the difference between what buyers will pay and what sellers want — is the real cost of entering or leaving a trade, not the listed price alone.
  • Robinhood charges no commission on options trades, but you still pay the spread and may owe taxes on profits depending on how long you held the contract.

How to Request Options Access in Your Account

Open the Robinhood app and tap the account icon in the bottom right corner. Scroll down and tap "Account Settings," then look for "Options" or "Investing" in the menu. Tap "Request Options Access" or "Enable Options Trading." Robinhood will ask you a series of questions about your investment experience, including how long you have been investing, what types of investments you have made, and your annual income.

Answer honestly — Robinhood uses these answers to determine which options level to grant you. There are four levels: Level 1 allows you to buy calls and puts only; Level 2 adds covered calls and cash-secured puts; Level 3 adds spreads and other multi-leg strategies; and Level 4 adds margin-based strategies. Most new traders start at Level 1 or Level 2. Robinhood usually approves or denies your request within a few minutes, and you will see a notification in the app.

Understanding Calls, Puts, and Strike Prices

A call is a contract that gives you the right to buy a stock at a set price (the strike price) by a set date (the expiration date). A put is a contract that gives you the right to sell a stock at a set price by a set date. You do not have to exercise these rights — you can sell the contract before expiration and pocket the difference between what you paid and what you sold it for.

The strike price is the price at which the contract becomes profitable. If you buy a call on Apple stock with a $150 strike price, you profit if Apple's stock price rises above $150 before the contract expires. If you buy a put with a $150 strike price, you profit if Apple's stock price falls below $150. The further the current stock price is from the strike price, the cheaper the contract usually costs.

Expiration dates range from a few days away to several months away. Contracts that expire sooner are usually cheaper but lose value faster as the expiration date approaches. Contracts that expire later cost more but give you more time for the stock to move in your direction.

Reading the Options Chain and Bid-Ask Spreads

When you tap "Options" on a stock, Robinhood shows you the options chain — a table of all available contracts for that stock. The columns show the strike price, the bid price (what buyers will pay right now), the ask price (what sellers want right now), and the Greeks. The bid is always lower than the ask, and that gap is called the spread.

If you want to buy a call, you will pay the ask price. If you want to sell a call, you will receive the bid price. The spread is the cost of the trade — if the bid is $2.50 and the ask is $2.75, you pay $0.25 per contract just to enter the trade. On a 100-share contract, that is $25. Robinhood does not charge a commission, but the spread is a real cost you cannot avoid.

Spreads are tighter (smaller) on popular stocks with lots of trading volume and wider on less-traded stocks or options far from the current stock price. Before you place a trade, look at the spread and ask yourself whether the profit you expect is large enough to cover it.

What Happens When an Options Contract Expires

Every options contract has an expiration date, usually a Friday. If you still own the contract when it expires, one of two things happens: if the contract is "in the money" (profitable), Robinhood will exercise it automatically, meaning you will buy or sell the underlying stock at the strike price. If the contract is "out of the money" (unprofitable), it expires worthless and you lose whatever you paid for it.

You do not have to wait for expiration. You can sell the contract any time before expiration and take whatever profit or loss you have at that moment. Most traders close their positions before expiration because the contract loses value quickly in the final days, and selling early locks in your profit or limits your loss.

If Robinhood exercises a call you own, you will buy 100 shares of the stock at the strike price and the shares will appear in your account. If Robinhood exercises a put you own, you will sell 100 shares at the strike price. Make sure you have enough cash or shares in your account before expiration, or Robinhood may sell other positions to cover the exercise.

Common Mistakes to Avoid When Starting Out

The biggest mistake new options traders make is buying out-of-the-money calls or puts on the hope that the stock will move far and fast. These contracts are cheap for a reason — they expire worthless most of the time. A $1 call that costs $0.10 sounds like a bargain until it expires and you have lost your entire investment.

Another common mistake is ignoring the bid-ask spread. On a thinly traded option, the spread can be 10 or 20 percent of the contract's price. You can lose money when ready just by entering the trade, even if the stock moves in your favor. Always check the spread before you buy.

A third mistake is holding a contract all the way to expiration. The last week before expiration, the contract loses value very quickly, even if the stock is moving in your favor. Selling a few days before expiration often locks in more profit than waiting until the last moment.

Finally, do not use margin (borrowed money) to buy options until you understand how margin calls work. If the value of your options drops, your broker can force you to sell other positions to cover the loss. Start with cash you own.

Closing a Position and Taking Profits or Losses

To close an options position, open the contract in your portfolio, tap "Sell to Close" (if you own the contract) or "Buy to Close" (if you sold the contract), enter the number of contracts, and submit the order. Robinhood will show you the bid price you will receive and the profit or loss you will realize.

You can close a position at any time during market hours, and the order will execute at the current bid or ask price. If you close early, you lock in whatever profit or loss you have at that moment. If you wait until expiration, the contract either exercises automatically or expires worthless — you do not have a choice.

When you close a position, Robinhood will show you the realized gain or loss in your account history. This profit or loss is taxable in the year you close the position, regardless of whether you made or lost money overall that year. Keep records of all your trades for tax time.

Frequently Asked Questions

Do I need a minimum account balance to trade options on Robinhood?

Robinhood does not require a minimum balance to request options access, but you do need enough cash or buying power to cover the cost of the contract you want to buy. If you want to sell covered calls or cash-secured puts (Level 2), you need to own the stock or have the cash set aside.

What are the Greeks and why do they matter?

The Greeks are numbers that show how a contract's price changes when the stock price, time, or volatility changes. Delta shows how much the contract price moves when the stock moves $1. Theta shows how much value the contract loses each day as expiration approaches. Vega shows how much the price changes when volatility changes. Understanding the Greeks helps you predict whether a trade will profit or lose.

Can I trade options after hours on Robinhood?

No, options trading on Robinhood is only available during regular market hours, which are 9:30 a.m. to 4 p.m. Eastern time on weekdays when the market is open. You can place orders before the market opens or after it closes, but they will not execute until the next market open.

What happens if I sell a call and the stock price rises above the strike price?

If you sold a call and the stock rises above the strike price, the buyer of that call will likely exercise it, meaning you will be forced to sell 100 shares of the stock at the strike price. This is why selling calls is usually done on stock you already own (a covered call) — if you do not own the stock, you will have to buy it at the market price to deliver it, which can be very expensive.

How are options profits taxed?

Options profits are taxed as capital gains. If you hold the contract for less than one year, it is a short-term capital gain and taxed at your ordinary income tax rate. If you hold it for more than one year, it is a long-term capital gain and taxed at a lower rate. You owe taxes on the profit in the year you close the position, not the year you opened it.