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How To Trade Options on Robinhood for Beginners

JJ Buckner

Wed. May. 06, 2020 12:30pm

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Trading options… We are going to be very basic in today's video.

So what is an option: An option is a contract giving the buyer the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) the underlying asset at a specific price on or before a certain date.

Why trade options?
1. Hedge against a declining stock market to minimize losses.
2. Used to generate recurring income
3. Used for speculative purposes such as wagering on the direction of a stock
Now I am usually a long term investor and typically don’t speculate stocks.

Lets open the Robinhood app and take a look at how to trade options and exactly what this means from one beginner to another.

First lets go to a stock… I will be buying put options in American Airlines.
1. Warren Buffett just announced he sold all airline stocks
2. The illness that is going on. NO ONE IS TRAVELING
3. Worst one of airlines set up based on long term debt.
Like I mentioned, I am buying put options. What is the difference between puts and calls?
If you are buying Calls, you think the stock price will go up
If you are buying Puts, you think the stock price will go down.

Since I think American Airlines price will be going down, I am buying puts.

So for example, if I buy this $12 put for the premium of $1.67 it cost me $167 for this put option. To break even it has to go down to $10.33. If it goes lower than that then I start making money.

I will have updates on the channel of how this trade and other future trades end up.

Thanks for watching!

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DISCLOSURE: Some of the links on this page are affiliate links, meaning, at no additional cost to you, I may earn a commission if you click through and make a purchase and/or subscribe. The ideas presented in this video are personal opinions and for entertainment purposes only. NOT FINANCIAL ADVICE!

#options #robinhood #tradingoptions