Robinhood Options

Robinhood Options

The mobile brokerage that made a name for itself by charging zero fees for equity trading. Has expanded that offer into options trading. This is after announcing that investors can trade options without having to pay a commission or per contract fees.

In an interview with Investopedia, Vlad Tenev, co-CEO of Robinhood, said that the move is part of the company’s strategy to make low-cost investing a reality for millions of investors. “If you look at the industry as a whole, with many many products, customers are being gouged, and options are perhaps the best example,” said Tenev. He noted that options trades typically cost investors $6.95 per trade. This is on top of $0.75 per contract, not to mention $19.99 upon exercising an assignment. “This is one step along the way to becoming the Amazon of the space,” he said.

Options:

Under the new options trading program customers do not pay a commission per contract fee, exercise fee or assignment fee. Customers can start trading options as of Wednesday, with a full release slated for the early part of 2018. While options trading is complicated, Tenev said it is something that Robinhood’s investor base was clamoring for. Over the past couple of years, Tenev said that offering options trading has been consistently among the top three requests by the firm’s customers. The new investment vehicle is targeted toward active traders and seasoned investors because of the complexity that can come with options trading. Tenev said that the company has seen way more interest than anticipated since announcing the new service earlier Wednesday. By mid-afternoon, 150,000 customers had signed up.




Competition:

Thanks to its low-cost infrastructure and the ability to automate trading functions. Robinhood has been able to steal customers from the traditional brokerages. It recently hit 3 million users and is closing in on E*TRADE, which has been in the game since 1982 and ended 2016 with 3.6 million brokerage accounts. Tenev said that Robinhood has saved customers more than $1 billion in fees. In addition to its low cost of operations, the mobile brokerage is able to offer commission-free equities and now options trades because of its premium service Robinhood Gold, which costs investors $10 per month.

The move into commission-free options trading comes on the heels of the company’s launch in November of a web-based version of Robinhood. Enabling investors to make trades and access research from their desktop or laptop computers. As for bitcoin, which is all the rage these days, Tenev said that Robinhood is seeing a lot of interest from its customers, but is taking a wait-and-see approach. Earlier this week, Cboe World Markets launched bitcoin futures, and CME Group is slated to do the same next week. A handful of online brokerages, including TradeStation and Ally Invest, are enabling customers to trade the contracts on day one. “We are certainly watching the space,” Tenev said, noting that Robinhood has nothing to share “right now” about bitcoin.

 

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