How To Exercise Stock Options On Robinhood?
A thorough guide. Before jumping into the main topic, what does it even mean by exercising an option?
Exercise of an option means that the holder buys the common stock of the issuer at the grant price. However, a stock’s price at the time of exercising an option doesn’t affect the exercise price.
And why would we exercise a stock option by the way?
First of all, exercising a stock option is always a preference, not an obligation. The reason for doing so is that the options grow in value over time since they were purchased. That’s why anybody exercises an option.
Now that we know the basics of exercising an option, let’s jump into the main topic.
How To Exercise Stock Options On Robinhood?
Stock options contracts, as compared to stocks, are very sensitive agreements between two parties. Where these parties make an agreement to a transaction where the buyer decides whether they want to exercise the option contract or not.
These contracts often are riskier than the usual financial contracts. And that’s why they need more literacy on basic things.
So we are now discussing hat how you can make these contracts and exercise an option.
Robinhood:
It’s an investing platform where you can do commission-free trading. It serves its users with commission-free stocks, options trading, ETF, and also cryptocurrency trading.
Exercise On Robinhood:
Robinhood has an automation system of exercising your in the money options before they expire. You don’t have to make any procedure or such for it. This automated exercise can be really time-saving for those traders and investors who can’t keep long records of their options and their exercising.
Expiration Of Options:
All options have some expiration date and if the buyer of a contract does not choose to exercise it before that date, there are no transactions. Sellers get the premium which is paid by the buyer and both parties continue their paths.
However, if the buyer cannot exercise their options contract, they are out of money, and consequently will not make any profits. The reason behind this can be the extreme prices of underlying securities.
In either case, it is better for the buyer to let the options expire till the strike price reaches the expiration time.
Early Exercising Of Options:
On the other hand, if you want early exercising of your options, you can simply search for the option naming “Exercise”, tap it and follow all the instructions that this app will show. By just doing some simple steps, you’d be able to make sure that your options are exercised. By the way, you will even receive a notification for your confirmation.
In case you don’t receive a notification or a confirmation email, you can approach their customer service team and report your problem there. Moreover, make sure you check your options status over and over.
Another important thing is to make sure before you tap on the “Exercise” option, you should have the needed amount of money in your account.
Before You Start Exercising On Robinhood:
When you decide to go for exercising options on Robinhood, you need to be aware of the risks that are involved. Options contracts have such strategies that they are not suitable for all investors. To have safe investing, you should make sure to educate yourself completely before you even start participating in any options contract.
Does Robinhood Charge a Fee to Exercise an Stock Option?
Yes, it does and it is called trading activity fees. We always take them into account at Stock King Options and we use the best broker for a each specific trading room.
The regulatory organization for brokerage forms FINRA charges a fee from all brokerage firms to cover the expenses related to supervising and regulations. In this way, Robinhood charges this fee from its customers.
Only customers with 50 or fewer shares don’t pay these charges. If we consider equities, Robinhood charges $0.000119 per one share while in the case of options it charges $0.002 per one contract.
