How to Trade Options on Robinhood

Jordan Mendiola
Photo by Yiorgos Ntrahas on Unsplash

Trading options on Robinhood is one of the easiest platforms to do it on. The developers made a slightly slower system than ToS or Think or Swim. 

It’s very user-friendly and managing a trade isn’t as complicated as some other brokers. For example, you can make money by trading equity in stocks or making money by trading options.

A single option contract consists of 100 shares at a specific premium price. You are borrowing 100 shares at a certain premium and hoping to sell it at a higher or break-even premium. 

How to buy an option contract

Make sure your account is set up for level 2 trading — options. 

Most people get instantly approved. That way, you can see the options chains once you’ve been approved.

Currently, I’m in a $300 Snowflake call for 8/20. It costed about $253 per contract, and I have 15 of them.

Once you receive your contracts, you’re officially in a play, and it’s your job to manage it.

How to manage an options trade.

I averaged down on my contracts in preparation for a rise in the stock price. Snowflake should recover nicely, and hopefully, my contracts are worth at least $500 each by the time I sell.

That will be about a 100% return taking me from $3,795 to about $8,000 if everything works itself out.

Check hourly and daily whether or not you want to stay in your option play so that you can maximize your profits and minimize your losses.

Options must be monitored, or else you subject yourself to losing money. 

How to sell an option

Selling your contracts is quite simple. Type in the number of contracts you’d like to sell and set the price you’re willing to sell them.

Once the premiums trigger your price, then the contracts sell, and all the money returns to your buying power.

Once you complete a sale of your contracts, you can scroll down, and it will show you how much you made or lost. 

As you can see here, I purchased 16 contracts of TTD at 0.56 and sold ten of them at 1.80 for a nice return. Just do the simple math, and you’ll calculate your gains or losses. 

Final Thought

Remember, trading options is extremely risky. It’s not for everyone who can just risk money and potentially lose a lot of it.

It requires patience, studying, practice, and perfection. 

The more you trade options on smaller stocks, the better you’ll be on the expensive, more explosive stocks.

Start small, then little by little, you’ll get better and better. 

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Creative entrepreneur, U.S. Army Engineer, and dedicated runner. Committed to sharing ideas that lead to more fulfillment in all areas of life. Email: 08.18.20 ?

Chicago, IL

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