Robinhood (HOOD) is set to start offering options trading to its UK customers early in 2025, as it continues to expand the features available on its platform to investors outside of the US.
Jordan Sinclair, president of Robinhood UK, told Yahoo Finance UK in an interview that the investment platform would launch options trading "at the beginning of next year".
"Many of our customers have been asking us about it already," he said.
Robinhood had mentioned in its third-quarter results that it planned to start offering options trading in the UK in 2025, having received approval from the Financial Conduct Authority, but had not gone into any more specifics on timings.
This will be the latest of its features which have been available US users to be rolled out in the UK, after Robinhood launched its trading platform here in March this year.
What is options trading?
Options trading has seen increasing interest from retail investors looking for alternatives to classic stock trading, though it is still less widely available in the UK.
This strategy allows investors to buy or sell options. These are financial contracts which give investors the right – but not the obligation – to buy or sell an investment at a predetermined price within a specific time frame.
They can be used on a number of different types of assets, including stocks, indices and exchange-traded funds (ETFs).
Investors typically trade options for three reasons – to hedge against a potential fall in price, generate income from a stock they own, or to speculate on the direction of an investment.
For each of these objectives, there are different options trading strategies.
The two main types of options that can be used in these strategies are "calls" which allow investors to buy the underlying asset at what is known as the "strike price" until the contract expires. The strike price is the price at which the option can be exercised.
The other main type of option is the "put", which enables the investor to sell the underlying asset at the strike price.
That is just a starting point and highlights that there is a lot more terminology associated with options trading, which can make it more complicated to understand than traditional ways of investing.
An advantage of options trading is that they can be cheaper than buying an asset outright, as a standard contract represents 100 shares of the underlying stock. Hedging can also offer a type of insurance against investment losses in your portfolio.
However, experts also emphasise the importance of understanding the terminology before getting started and that investors need to be more active in tracking these investments.
Margin trading and share lending
In addition to this upcoming launch, Robinhood has already introduced other features in the UK. In October, it began rolling out margin investing, which allows investors to borrow cash against their existing asset holdings, enabling them to buy additional securities.
Prior to this, in September, Robinhood launched share lending for UK customers, where customers can earn passive income by lending out their stock holdings. Both moves are part of Robinhood's strategy to broaden its market share internationally.
Like options trading, these features can be a bit more complicated for retail investors to understand so they haven't been as widely available in the UK.
Asked how Robinhood ensures that its customers are using these features responsibly, Sinclair said that when the company is building these features it considers how to "test knowledge and experience, [and] create eligibility criteria that really make sure that the right customers are getting access to this product".
"But perhaps for the beginner investor, it isn't right for them and we have the right controls in place," he added.
Robinhood made its name by offering commission-free trading in the US, disrupting the traditional brokerage model. Its user-friendly platform attracted millions of new, mostly young investors.
It became associated with the "meme stock" craze of 2021, as it was the preferred platform of retail investors spurred on by posts on Reddit (RDDT) and Twitter (now X). They piled into stocks such as gaming retailer GameStop (GME) and US cinema chain AMC Entertainment (AMC) that were typically heavily shorted by institutional investors.
Robinhood had 24.8 million customers as of its November operating data update, released in December, which was up by approximately 1.5 million year on year.
It also recorded a 36% increase in total net revenues to $637m (£501m). Robinhood's transaction-based revenues were up 72% year on year to $319m, which was primarily driven by a 63% rise in options revenue of $202m.
Robinhood shares are up 191% year-to-date, logging strong gains following the US presidential election. True to form, it rolled out contracts to enable users to bet on the outcome.
Revenue from cryptocurrency trading transactions were up 165% year on year, contributing $61m to the total.
Bitcoin (BTC-USD) has rallied since Donald Trump's election win, topping $108,000 on Tuesday, as investors look forward to a more favorable regulatory environment for cryptocurrencies once he returns to office.
Robinhood doesn't currently offer cryptocurrency trading in the UK, and its CEO Vlad Tenev suggested in an interview with The Times that the UK's policy mindset towards crypto and margin trading was "backwards".
When asked whether cryptocurrency trading launch was on the cards in the UK, Sinclair said: "Well, we always listen to our customers as the first port of call, and I think customers increasingly want access to a wide range of asset classes.
"I think in the UK recently there [have been] some really great steps in terms of a regulatory framework and published regulatory roadmap which is always a great place to start for the UK in the crypto environment. We'll continue to listen to our customers and there's some really great steps on the regulatory framework side."
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