Using Volatility to Your Advantage: Robinhood Options Trading Explained

Thanks to their large upside potential, many seasoned traders choose to trade options to play the markets. Fintechs like Robinhood have made accessing the market easier for seasoned traders to fine-tune their strategies, building based on their trading level.

With inflation remaining stubborn, the markets appearing to be waiting for the Federal Reserve's next move on interest rates and the U.S. about to enter what is expected to be a polarizing presidential election, volatility has been high. In April, the VIX Index – which Wall Street uses to gauge volatility in the market – hit its highest level since late October 2023, when the Israel-Hamas conflict began. Year-to-date, the VIX Index is up more than 12%.

While volatility may scare buy-and-hold investors, for active options traders, some look at it as an opportunity. After all, with options trading, investors can engage in a variety of diverse strategies that have the potential to work in all sorts of market conditions, whether it's speculating stocks will go up or down based on their bearish and bullish outlooks. Options are also cheaper than buying shares outright, creating leverage, which means the gains on your investment could be amplified – as can losses. However, options expire, and you can lose your entire investment in a short period of time. Some strategies present a potential for substantial or even unlimited losses.

Accessing options trading is getting even easier thanks to Robinhood's trading platform. Not only do customers get access to options but also advanced charts, including the ability to track and modify technical indicators such as moving average, relative strength index and moving average convergence divergence. Furthermore, there are no contract fees.*

Robinhood's efforts to improve access are not surprising. For some time now, the company has been on a mission to level the playing field when it comes to investing by providing access to an array of investment and retirement products, keeping costs down and commissions at zero (other fees apply). Take Robinhood Gold for one example. Gold subscribers get 5% APY on uninvested cash in their brokerage account, a 1% boost on brokerage transfers and instant deposits.

Options trading is growing in popularity as regular retail investors learn its virtues. Robinhood wants to be a leader in the space and is pulling out all the stops to achieve that.

If you are interested in trading options and want to do so at a low cost with all the support you need, then check out Robinhood's offering here.