Robinhood is a popular investment app that has made investing accessible to millions of people.
The platform offers a variety of investment options, including stocks, ETFs, crypto and options.
Before we delve into the different options levels, it's worth noting that options trading involves significant risk, and it's important to understand the strategies before investing.
Depending on your position, it's possible to lose your invested principal and potentially more.
It's always a good idea to identify an investment strategy that makes sense for you and to learn about the different options strategies before diving in.
Level 1 options trading allows users to buy and sell options contracts, which are essentially agreements to buy or sell a particular stock at a specific price.
Level 1 is the most basic level of options trading and is available to all Robinhood users who are approved for options trading.
Level 2 options trading allows users to buy and sell options contracts as well as long call and put options.
A long call is a bullish strategy that involves buying a call option, while a long put is a bearish strategy that involves buying a put option.
With Level 2 trading, users can also execute covered calls, which is a bullish strategy that involves owning 100 shares of the underlying stock or ETF and simultaneously selling a call option.
It's worth noting that at Robinhood, you must already own 100 shares of the underlying stock or ETF to sell a call.
Level 3 options trading is the highest level of options trading offered by Robinhood.
Level 3 options trading allows users to buy and sell options contracts, long call and put options, and execute covered calls.
In addition, users can execute short put options, which is a bullish strategy that involves selling a put option.
With Level 3 trading, users must have enough buying power to purchase 100 shares of the underlying stock for each put they sell.
This is a cash-secured put because the potential purchase of shares is secured by cash in your account.
In conclusion, Robinhood offers several levels of options trading, and each level has different requirements and risks associated with it.
It's always a good idea to identify an investment strategy that makes sense for you and to learn about the different options strategies before diving in.
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