Robinhood option trading upgrades include in-app exercise, education
Online retail brokerage Robinhood has announced some changes to its trading app, in particular where it comes to options trading.
Robinhood has somewhat revolutionized retail brokerage by offering commission free trading across a variety of instruments including stocks and options, and accelerating the use of the mobile phone as a main trading device. However the company has come under scrutiny for a variety of issues including having ill-prepared and educated traders doing very risky things, in large sizes.
The company stated that its mission has been to bring opportunity, through technology, to help people invest, on their terms, on their mobile devices. Robinhood has introduced new access points to the markets and created space for people to learn about the financial world. The company pioneered commission-free trading, and was the first to do so for options.
With its options trading experience, Robinhood stated that it aims to provide investors with an intuitive and cost-effective platform to trade options, which includes enhanced educational materials on options trading. It offers commission-free options trading alongside stocks and ETFs to help customers manage all of their investments in one place.
The company noted that it is always working to make improvements in the product and to enhance communications to its customers. Over the last few months, it has been rolling out multiple updates to its Robinhood Options offering in an effort to deliver the best possible experience for customers.
In-App Exercise and Instant Exercise Features
Robinhood has added the ability to exercise contracts in the app. With in-app exercise, investors can exercise options contracts directly in the app to help avoid delays and trade restrictions. Funds and shares from exercises are available immediately during market hours.
In designing this experience, the company said it has been deliberate about adding more safeguards and information. For example, before exercising an option, customers will be asked to review their strategy, associated risks, and potential reasons to not exercise the contracts, in order to help them determine whether exercise meets their objectives. The app also display alerts and available actions when exercising a contract. These features launched in the last few weeks and are fully rolled out to all options customers.
Improvements to Early Assignment
Robinhood has recently revamped the early assignment experience to include new guidance to help with early assignment scenarios. It has built a resolution flow that will guide customers through the potential actions of exercising a contract or trading shares to resolve an account deficit, and added the ability to contact support directly through the app. These changes are rolling out to customers now.
Additionally, the company rolled out changes to allow customers in certain cases to continue trading as soon as they take action on a potential restriction. It recently launched a self-service option to buy shares even if in a short position due to an early assignment. Previously, this was only possible by contacting support.
Updates to Buying Power
Robinhood has begun rolling out improvements to how it shows buying power in the app. If customers have an account deficit, the app will display the deficit and help them understand the actions they can take to resolve it in different trading situations.
Options Trading Education
The company said it has revamped resources on its Help Center to add more clarity, including content around options strategies, advanced options strategies, and more information on topics like early options assignments.
It also recently launched additional in-app messaging to help customers better understand the mechanics of early assignment, in which a customer trading a multi-leg options strategy has one leg of the position assigned for exercise prior to the expiration date. Robinhood also recently began rolling out a new onboarding experience to walk approved options customers through the foundations of an options spread before upgrading from Level 2 to Level 3 options trading.
The company noted it has hired an Options Education Specialist who will join its team later this month and will continue to support these initiatives, as well as provide educational guidance and expertise in communication channels — from the website to social media to in-product.
Additional Eligibility Criteria
The company is rolling out new financial criteria and revised experience requirements for new customers seeking to trade Level 3 options strategies. Robinhood requires customers wishing to trade options to disclose, among other things, investment experience and knowledge, investment objectives, and financial information such as income. The company then conducts an assessment of this information in deciding whether a customer may be approved for options trading.
Investing in and Growing Customer Support
To ensure it continues to meet customers’ needs, Robinhood said it recently announced that it is hiring hundreds of new registered financial services representatives this year in Denver, Colorado, Southlake, Texas, and Tempe, Arizona. Across all of its locations it is adding new team members, including dedicated options support representatives, to help reduce response times, build more self-service tools, and enhance informational and educational tools.
Its latest funding round valued still-private Robinhood at $11.2 billion.