Options Knowledge Center | Robinhood

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An option is a contract between a buyer and a seller, and its value is derived from an underlying security. These contracts are part of a larger group of financial instruments called derivatives. With Robinhood, you can trade options contracts on stocks, ETFs, and indices.

Generally speaking, options are quite flexible, and can be used in different ways depending on your goals. Some people use options to hedge the risk of losses (like helping manage portfolio value during a downturn). Others may use options to pursue additional income by monetizing the stocks they own. However, it’s important to note that trading options is generally riskier than investing in stocks. When trading options, potential losses can accrue at a much faster rate, and it’s possible to lose your entire initial investment (or more). Trading options requires approval on Robinhood, and it isn’t appropriate for everyone.

Want to learn more before diving in? Our Options Knowledge Center explains terminology, basic and advanced trading strategies, and how to place an options trade on Robinhood.

Check out Trading with Legend to learn more about trading options in Legend.

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