Once you log into your Robinhood brokerage account, you will find an “Account” link on the desktop version's home screen. Next, you'll learn everything you need to know about options trading on Robinhood, from how to enable options trading, the exact steps for trading specific options, and how to understand risks. You cannot trade options on Robinhood until you are a level 2 trader. Robinhood analyzes your trading experience, your investment objectives and your financial situation to assess the level at which you can trade.
Depending on the parameters you meet, you will receive a Level 1, Level 2, or Level 3 designation. Robinhood and other brokerages use these levels to mitigate some risks. Like other stock trading apps, Robinhood requires some experience in stock trading before it can trade options. You can try to re-enable options trading after you have made some trades.
You will need adequate experience in options trading before Robinhood gives you Level 3 status. Robinhood doesn't outline exact guidelines, but you can always go back and check your eligibility after performing some trades. Options trading on Robinhood has been disabled because, frankly, they don't have it working properly yet. Your account must be quite active to trade options on Robinhood, and you will also need proven experience in pitchforks.
Once you have submitted the necessary information, Robinhood evaluates it and decides whether or not to approve you for options trading. Robinhood is a free trading platform that allows you to trade stocks, exchange-traded funds, options and cryptocurrencies for free. Of course, you'll first need to gain enough experience to be approved to trade options on this fantastic platform. Robinhood recommends reading the Characteristics and Risks of Standardized Options eBook before you place your first trades.
Over time, this strategy is much more likely to generate higher returns, rather than chasing hot new stocks or trying your hand at options trading when you don't quite know what you're doing. Robinhood is a very easy application to trade with options and deal with the business of your customers. It's worth mentioning here that Robinhood only allows three-day trades within a 5-business day trading window before being considered a daily pattern trader. The break-even point is when the underlying security must be traded at maturity for you to break even on your investment, taking into account the current value (premium) of the option.
We were told that clients should go through a manual review process, which includes someone from Robinhood's brokerage trading team contacting you to test their knowledge of options trading. To get approved for options trading on Robinhood, you'll need to enable it in your Robinhood settings. According to this author, when the algorithm asks for more experience in options trading, it looks for approximately 10 full calls or puts. By getting approved to trade options, you'll be well on your way to getting the most out of your Robinhood account.
Once you enter this information, Robinhood will review it and contact you if you are approved to trade options. Keep in mind that you also need a certain level of risk tolerance if you want to participate in level three options trading on Robinhood.