robin hood makes it so easy to trade options that this guy can figure it out and if a wall street best degenerate can figure out how to trade options you can too so in this video i'm going to be showing you how to trade options using the robinhood app the first thing you're going to do whenever you're trading options using the robin hood app is going to be to search for the stock that you want to trade so i'm going to click the search button on the bottom in the middle and then i'm going to search for spy which is the s p 500 index and this is the most popular stock that i like to trade and i usually trade this around big events such as fomc meetings or jobs reports and things of that nature that are going to move the market in a very big way so i'm going to go to spy and then i'm going to click the tray tab on the bottom right that's red and then i'm going to click on trade options and the next step whenever you're trading options is going to be to choose your expiration date and this is the day that you're setting as a timeline for your trade so if you want to make a very quick trade then you can go with a daily option with spy because they have three expiration dates every single week so i could go with tuesday september 6 if i want the shortest expiration date possible and the shorter the expiration date whenever your trading options the cheaper these options are going to be the more time that you give your option to expire the more volatility that the stock can experience so hence the higher prices for longer expiration dates so if i were to go out to something like march 2023 these options that are at the money or the 390 strike price is going for 3 258 now you're seeing it as 32 and 58 cents but you're controlling 100 shares of the stock so you multiply the price by 100 and that's how much you're going to be paying to open this option but we're going to keep it cheap and go with the shorter expiration dates because i think that spy is going to be going up over the next week so i'm going to go with september 9th as my expiration date so i'm assuming that spy will go up between now and this friday and since i'm bullish on the stock i'm going to buy a call option if i was bearish on the stock then i'd be buying a put option but since i'm bullish again i'm going to be buying a call option and if i want to increase the odds of making a profit for this trade i need to go with a lower strike price because if the option expires out of the money where the stock is below my strike price it's not going to have any value by the time the expiration date comes around so i'm going to choose an option that's in the money already so i'll go with the 390 call and this means that i'm agreeing to buy a hundred shares of spy at 390 on or before my expiration date on september 9th and for this option i'm going to be paying 600 again six dollars times 100 shares that i'm controlling which means that i'm going to be paying 600 in order to open this call option and the next thing that you're going to notice whenever you're trading options on robinhood is this thing known as the bid ask spread so this is the difference between what people are willing to pay for an option which is the bid price and what people are willing to sell that same option for which is the ask price so in this case the bid or what people are going to buy this 390 call for is 596 and what people are willing to sell the same call for is 600. and whenever it comes to robinhood and buying options almost all of the time you're going to have to go with the ask price you're going to have to pay the maximum amount in order to open your option and this is kind of the drawback of using robinhood because if you use other brokerages typically you can get filled somewhere in the middle so i might be able to buy this for something like 598 or 599 by using something like fidelity or td ameritrade but since robinhood is commission free and they're using market makers and payment for order flow this means that i'm going to have to put in a limit price for six hundred dollars limit orders are the standard so all i have to do is type in one contract at the top i'm gonna type in six dollars for the limit price i'm going to review this trade and then i'm going to swipe up to submit and now my hopes is that sp y will go up between now and my expiration date and how much i want the stock to go up is going to be based on my break-even price which if we go back to the option this is going to be the 390 strike price plus the six dollars that we're paying in order to open this option or the 600 since we're buying 100 shares of the stock so this means that our break even honor expiration date is going to be 396 this means if spy is above 396 on our expiration date then we're going to make a profit but if it's below 396 on our expiration date we're going to make a loss and if it's below our 390 strike price again this option is going to expire out of the money which means that we lose the full 600 investment that we put into this trade so that's the risk whenever it comes to trading options and buying options if your option expires out of the money then you lose what you put down for the trade so if i ended up buying say ten of these for a total of six thousand dollars that means my max loss for opening these ten call options will be six thousand dollars so that's a pretty risky trade to put on so you need to account for the risk whenever your trading options but this is only on the expiration date and you can close your option any time before the expiration date so if i had actually opened this 390 call and i wanted to get out of it before my expiration date on september 9th i could just sell this option to close it and you can estimate the profit or loss that you're going to make on an option by using an app such as option strap option strat is going to give you the profit or loss on or before your expiration date so we can see that it has every day before the expiration and it has different prices where the stock could be so if spy were to climb all the way to 401 by tomorrow then this option would have gained 549 dollars so if i decided to sell it whenever spy hit 401 tomorrow then i'd be selling this option for hundred and forty nine dollars but if spy were to fall from where it is right now to say 388 dollars that means that i would lose 330 dollars if this happened by tomorrow august 5th you can see the range of possibilities for your profit and loss before your expiration date so this is a super useful app to have but let's say that i'm not bullish for spy between now and my expiration date on september 9th instead of buying a call option for spy i'd be buying a put option since put options are bearish whenever you're buying them so whenever i buy a put option if i want to make sure that the option expires in the money i want to go with a higher strike price so i could buy something like this 395 dollar put option and this option is going for 594 dollars so just about the same price that we paid for the 390 call and whenever we buy this 395 dollar put option we're wanting spy to go down by the end of the week and how much we're wanting it to go down is going to be based on what we're paying for the option again 594 at the ask price and we're going to subtract that 594 from the 394 dollar strike price so our break even whenever we open this option is going to be 389 in six cents so this means if spy is below and eighty nine dollars and six cents then we're going to be at a profit for opening this option but if it's above 389 dollars and six cents then we're going to be at a loss for opening this put option and we're going to lose the full 594 dollars if spy is above our 395 dollar strike price on our expiration date so this means if spy is even at just say 396 we lose that full 594 or if it's at say 400 dollars we still lose that same 594 dollars it doesn't matter how far the option is out of money on the expiration date if it expires out of the money that means that it's completely worthless since it has zero intrinsic value intrinsic value is the difference between the stock price and your strike price and this is only for in the money options so for put options this is going to be a strike price that's above the current market value for the stock and for call options again this is going to be for strike prices that are below the current stock price and you don't just have to buy options whenever you think a stock is going to go up or down there's a ton of different ways to trade options you could trade spreads you could sell options to make income by collecting premiums and there's a ton of different strategies out there i've covered a lot of them on the channel so hopefully you check it out thanks for making all the way to the end of this video and thank you to all my patrons for their support and as always remember to stay positive stay green i'll catch you in the next one bye guys