Trading Options for Beginners on Robinhood

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Join Robinhood and get a free share of stock (like Apple or Microsoft) using this link: http://share.robinhood.com/adaml496

At 1:38 I say “$14”, I meant to say “$14 per share”

There is a poll active on my channel for those who are interested in seeing me grow a small account with options in a video series. If this sounds up your alley, go vote!

I’m all about making quality, useful content for you guys and your support allows me to continue to do so with increasing production quality. Thank you!

In this video, we take a look at the very basics of how to trade options on Robinhood. If you use a different brokerage, this video will still explain options well enough to be applicable for you. This is geared toward beginners, and will help you get a broader picture of how options work. Please suggest ideas for future videos! PLEASE SEE BELOW FOR SOME SMALL CORRECTIONS.

NOTE: The strike price of a call option is what you can buy each of those 100 shares for, not what you can buy all of them for

I made a mistake when talking about puts: puts do not have infinite profit potential since a stock’s price can not be less than zero. It is capped.

01:02 – basics of call options
03:35 – Summary of OTM, ATM, ITM
04:45 – option premium
07:40 – Breakeven
09:54 – Expiration & Theta
13:48 – Implied Volatility
17:45 – Long call max P/L
19:55 – Options profit calculator
24:30 – Buying puts
26:40 – Long put max P/L
27:40 – Buying OTM vs ITM

Options are a type of financial derivative, meaning that their value is derived from another security (in this case, stocks). An option’s value is contingent on time until expiration, volatility of the underlying stock, and closeness/deepness of being ITM. Stock options can provide amazing (and sometimes devastating) leverage, so please use carefully. Options can also be used as a hedging tool.

There are many strategies that options can be used for such as vertical spreads, calendar spreads, Iron condors, Jaded Lizards, etc. Each strategy has a unique goal and can be altered and tweaked to a very fine degree.

Options are provided by most brokerages, and usually require approval from the brokerage. In Robinhood, you can apply for options trading in settings. In order to enter more complicated trades like the ones mentioned above, you need to be approved for options level 3 in settings. Options level 2 will allow you to simply buy calls and puts. Most strategies involve both buying and selling short calls and puts.

Robinhood no longer allows entering box spreads. Google /u/1R0NYMAN to see why. He is also a great example of how options can inflict tremendous harm on the trader if not used properly. If you’re not sure about any aspect of a trade, then do not enter the trade. It is important to know all that you can about any given trade to prevent blowing up your account or getting margin called.

Comments

InTheMoney says:

The strike price of a call option is what you can buy each of those 100 shares for, not what you can buy all of them for
.

I made a mistake when talking about puts: puts do not have infinite profit potential since a stock's price can not be less than zero. It is capped.

Awfully Odd says:

Love this troduction.

Jay Dub says:

Step1: Avoid ETF's
Step2: Look for stocks that look over bought
Step 3: Buy Puts with a 2 week period, avoid Calls forever
Step 4: ??????????????
Step 5: Profit

I killed it today with Netflix. 10 shares banked me 1.5k

Danny Murphy says:

I’ve watched tons of trading videos made by many people. You’re video is hands down the best I’ve seen. You are clear and concise and great at explaining. Thank you!!

Shadowwind4 says:

Love your video and feel like I have a better understanding of the subject. I’m still confused about implied volatility, not sure what it is exactly even though you broke down how it effects the options when it increases or decreases. Does anyone know any good resources for learning about implied volatility?

Hood skin is good skin says:

Just buy the 15$ books at Barnes and noble way easier to grasp cuts out allllllll the bullshit

Big Jim says:

3:40 like A BOSS!!! _____

Jimmy P says:

If I’m in the money, I don’t sell by expiration, what happens?

Ashley Efrati says:

I want to meet you! You’re dope!

Rumpelstiltskin Van Dam says:

Yo, great freaking presentation!!!!

pikiwiki says:

he sounds like an autist

trouble says:

At 15:54, low volatility is under the average or mean right? Is that "put" or is it not?

trouble says:

Can you explain retire date means?

buffmypickles says:

I followed your advice and lost my money on AMD calls.

Sweeneytv says:

Let’s see if I get this. So for an option trade say the stock is at 15.35

Do I buy a low call if I think the stock price will go down? Like 14.00

And I buy a high call if I think the stock will go up? Like 16.00

So. My question is. Let’s say I buy high and the stock price jumps to 16.35.

Should I sell that high call?

Richie Sacolic says:

Sorry man way too complicated too much info at once and scribbling on the screen too bad you can't explain one thing at a time but thanks for the video

Andrew Portner says:

Thank you. I feel I need to buy $TSLA puts before the market opens on Tuesday 1/23/19 because that shitpile is about to cave in.

gilda mather says:

is there a stop loss that you can set on your premium…like if the premium you paid was 30 doolrs you want to place a maximum premium say 40 dollras only upto that you are willing to pay if the price go up and down….

kayEs85 says:

a perfect line drawn with a mouse at 3:41… on a share price at 12.34. with only 4% battery. this is too much for me to handle.

John Lestina, Jr says:

Great Video! I have a question about the Implied Volatility – you showed the graph of IV, but how can I see that information on RH? I can see what the current IV is, but how do I know if that is high or low compared to the mean for that option? Thanks

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