Robinhood Financial LLC is seeking to do for options what it did for stocks: make trading free.
The Palo Alto, California-based startup, which operates online as a brokerage like ETrade Financial Corp., announced Wednesday that it is offering free stock-options trading. Robinhood said it has more than 3 million customer accounts after three years in operation. It is working to keep attracting users whose uninvested cash generates interest for the firm, and who may graduate to its for-pay services.
“We view this as completely changing the way that consumers trade and invest in stock options,’’ co-founder Baiju Bhatt said in an interview. “When we look at the landscape right now, we see a lot of room for improvement. It’s extremely expensive to trade options.”
The firm started out by offering free stock trading. Rather than making money on each trade, it relies on products like Robinhood Gold which lets users trade on margin and get access to extended trading hours.
Trading options is traditionally more expensive than trading stocks. While brokerages can charge $5 to $10 for equities trades, options cost between $20 and $50, depending on specifics like the size of the contract.
Bhatt said that he expects the product to perform well, based on customer inquiries and surveys by the firm. He said the company plans to introduce more services in 2018.
“There is a lot of overlap between the people that said they wanted options as well as the people that trade more actively and use services like Robinhood Gold,” Bhatt said.
This article was provided by Bloomberg News.