Robinhood is a popular platform that allows users to invest in stocks, ETFs, options, and cryptocurrencies. This guide provides a basic understanding of the platform and its offerings, without providing financial advice.
Understanding Robinhood’s Offerings
Robinhood offers a range of investment opportunities. It’s important to understand the risks associated with each.
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Stocks: Represent ownership in a company.
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ETFs (Exchange Traded Funds): Baskets of stocks or other assets that track a specific index, sector, or investment strategy.
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Options: Contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. Options trading involves significant risk and is not appropriate for all customers.
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Cryptocurrencies: Digital or virtual currencies that use cryptography for security.
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Futures: Standardized contracts obligating the buyer to purchase or the seller to sell an asset at a predetermined future date and price. Futures, options on futures and cleared swaps trading involves significant risk and is not appropriate for everyone.
Commission-Free Trading
Robinhood is known for offering commission-free trading of stocks, ETFs, and their options. However, other fees may apply.
- Commission-Free Trading: $0 commissions for Robinhood Financial self-directed brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Index options are subject to a per contract fee.
- Other Fees: Trading (regulatory/exchange) fees, wire transfer fees, and paper statement fees may apply. Review Robinhood Financial’s Fee Schedule for detailed information regarding brokerage transactions. Robinhood Derivative’s Fee Schedule provides information about commissions on futures transactions.
Risks and Considerations
Investing involves risk, including the potential loss of capital. Certain products, like options and futures, carry significant risk and may not be suitable for all investors.
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Options Trading Risks: Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies.
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Futures Trading Risks: Futures, options on futures and cleared swaps trading involves significant risk and is not appropriate for everyone. The Futures Risk Disclosure Statement and the Event Contract Risk Disclosure provide more information about the risks associated with these products.
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Virtual Currency Futures Risks: Prior to trading virtual currency Futures products, please review the NFA Investor Advisory & CFTC Advisory providing more information on these potentially significant risks.
Robinhood Entities and Protection
It is important to understand the different entities within Robinhood and the protections offered.
- Brokerage Services: Offered through Robinhood Financial LLC (RHF), a registered broker dealer (member SIPC).
- Clearing Services: Provided through Robinhood Securities, LLC (RHS), a registered broker dealer (member SIPC).
- Cryptocurrency Services: Offered through Robinhood Crypto, LLC (RHC) (NMLS ID: 1702840).
- Spending Account: Offered through Robinhood Money, LLC (RHY) (NMLS ID: 1990968), a licensed money transmitter.
RHF and RHS are protected by SIPC. RHC is not a member of FINRA and accounts are not FDIC insured or protected by SIPC. RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance.
Conclusion
Robinhood provides access to various investment opportunities. Before using the platform, understand the risks involved, the different products offered, and the various entities that comprise Robinhood. Consider your financial situation and consult with a financial advisor before making any investment decisions.
