Options trading sounds intimidating, but the app interface makes it feel almost too simple. That can be a good thing for learners, and a risky thing for people who skip the basics. This guide walks through how to buy options on Robinhood the right way, so you understand what you are clicking before you click it.
Before we get into the steps, a quick reminder. Options can lose value fast, and beginners often pay the price for that lesson. Take it slow, start with small positions, and only use money you can afford to lose.
What Is an Option, in Plain English?
An option is a contract that gives you the right, but not the obligation, to buy or sell a stock at a set price before a certain date. One contract usually controls 100 shares.
There are two basic types. A call option lets you buy shares at a set price. A put option lets you sell shares at a set price.
The price you pay for the contract is called the premium. If the stock does not move the way you expect before expiration, you can lose that entire premium.
Step 1: Enable Options Trading on Robinhood
New Robinhood accounts do not have options turned on by default. You need to apply for access first.
Open the app, tap your account icon, then go to Menu, then Investing. Scroll to Options Trading and tap Enable. You will be asked about your income, net worth, investing experience, and goals.
Robinhood uses your answers to assign you a trading level. Level 2 covers buying calls and puts, which is what most beginners use. Higher levels unlock spreads and uncovered options.
Robinhood
Robinhood
Robinhood is a trading platform that brings stocks, ETFs, options, futures, prediction markets, crypto, and retirement accounts together in one app.
Standout feature
One platform for stocks, ETFs, options, futures, prediction markets, and crypto
Fees
$0 commission on stocks, ETFs, and options.
Pros
Zero-commission trading on stocks, ETFs, and options
Cons
Best perks (high APY, lower margin rates) require Gold subscription ($5/month)
Step 2: Pick a Stock and Find Its Options Chain
Once options are enabled, search for any stock you want to trade. On the stock detail page, scroll down until you see the Trade button, then tap it and choose Trade Options.
This opens the options chain. It is a table that lists every available contract, sorted by expiration date and strike price.
Tap the date selector at the top to choose an expiration. Shorter expirations cost less but lose value faster. Longer expirations give the trade more time to work, but they cost more upfront. If your application got rejected, our guide on why you can't trade options on Robinhood explains common reasons.
Step 3: Choose a Call or a Put
At the top of the chain you can toggle between Calls and Puts. If you think the stock will go up, you might buy a call. If you think it will go down, you might buy a put.
Each row shows a strike price and the premium per share. Multiply the premium by 100 to see the total cost for one contract.
Look for contracts with reasonable volume and open interest. Thinly traded options can have wide bid-ask spreads, which makes it harder to get a fair price.
Step 4: Place the Order
Tap the contract you want. A trade screen appears with order details.
Make sure Buy is selected at the top. Set your quantity, usually starting with one contract while you are learning. Choose your order type, with limit orders being safer than market orders because they cap the price you pay.
Review the total cost, then swipe up to submit. The order may fill instantly or wait until a seller matches your price.
Step 5: Manage the Trade
After your order fills, the contract shows up in your portfolio. You can monitor the value as the underlying stock moves.
You have three choices before expiration. You can sell to close and lock in a gain or loss, exercise the option if it is in the money, or let it expire. Most retail traders simply sell to close.
Set alerts so you do not forget about a position. Options decay every day, especially in the final weeks before expiration. If you need to free up funds, see how to withdraw buying power from Robinhood.
Common Mistakes Beginners Make
Buying far out-of-the-money contracts because they look cheap. They are cheap for a reason, and most expire worthless.
Holding through expiration without a plan. If you are unsure what to do, closing early is usually safer than letting time decay eat the position.
Ignoring implied volatility. High IV means you are paying a premium, and a drop in IV can hurt the trade even if the stock moves your way. If you want a refresher on Robinhood basics before going further, our Robinhood review walks through the platform features. You can also compare options with Public.com vs Robinhood if you are weighing brokerages.
Building a Foundation Before You Trade
Options can be a useful tool, but they reward people who already understand the underlying stocks and broader markets. If your credit and savings need attention first, consider building those before risking capital on contracts.
A tool like Firstcard can help you grow credit-building habits while you learn investing on the side. It also helps to know what happens if Robinhood goes bankrupt so you understand how your trading funds are protected. A stronger financial base makes every trading decision feel less stressful.
Investing involves risk and past performance does not guarantee future results.
Frequently Asked Questions
How much money do I need to start buying options on Robinhood?
There is no set minimum, but most beginner contracts cost anywhere from $20 to a few hundred dollars per trade. Start small with money you can afford to lose, and avoid putting your entire account into one position.
Why was my Robinhood options application denied?
Applications can be denied if your stated experience, income, or net worth do not meet the criteria for the level you requested. You can wait, update your profile honestly as your situation changes, and reapply later.
Can I lose more than I invest when buying options?
When you buy calls or puts at Level 2, your maximum loss is the premium you paid. Selling uncovered options is different and can carry much larger risk, which is why those strategies require a higher account level.
What is the difference between exercising and selling to close?
Exercising means using your right to buy or sell the underlying shares at the strike price. Selling to close means selling the contract itself to another trader, which is the most common way retail traders exit a position.
