Everyone wants that they must get good returns on their investment. But we cannot forget that every platform has some rules and regulations that we need to follow. The same is the criteria for people who are investing through Robinhood.
If you are a Robinhood application user you might have heard about the different levels in it. There are some strategies that users can see whenever they wish to upgrade the level of their investment. Well in this article we will help you to know about some strategies that can help you to get a level 3 options approval in Robinhood easily. Let’s have a look!
Strategies one can follow to get level 3 options approval in Robinhood:
Call debit spread:
A debit spread is an options strategy in which the trader buys a long put and a short call, with the same underlying asset and the same expiration date. The options are bought at different strike prices, with the long put having a lower strike than the short call.
This strategy is designed to profit from a decline in the price of the underlying asset, as the long put will increase in value while the short call will lose value. The maximum profit from this strategy is equal to the difference between the strike prices of the two options, less the premium paid for the options. The maximum loss is equal to the premium paid for the options.
This strategy is often used by investors who are bearish on the market but don’t want to tie up a lot of capital in a short sale. It can also be used as a hedge against a long position in the underlying asset.
Call credit spread:
A call credit spread is an options strategy that involves buying a call option while simultaneously selling another call option with a higher strike price. The effect of this is to create a net credit, which is the difference between the premiums of the two options.
The call credit spread is a bullish strategy, as it profits from an increase in the underlying asset’s price. The maximum profit is achieved if the underlying asset’s price is above the strike price of the call option that was sold. The maximum loss is equal to the difference between the strike prices of the two options, less the net credit.
To set up a call credit spread in the Robinhood app, you will need to have two different call options with different strike prices.
Put debit spread:
A put debit spread is an options strategy in which the investor buys an options contract with a higher strike price and sells an options contract with a lower strike price, all for the same expiration date. The term “debit” refers to the fact that the option premium paid for the options contract with the higher strike price is greater than the option premium received for the options contract with the lower strike price.
The purpose of a put debit spread is to take advantage of a situation where the investor believes that the underlying security will experience a small move in price. By using a debit spread, the investor limits their downside risk while still being able to participate in any upside potential.
Put credit spread:
A Put credit spread is an options trading strategy that involves buying and selling options with different strike prices, but with the same expiration date. The options tend to be of the same type, either all calls or all puts.
This generally involves buying a lower strike price option and selling a higher strike price option of the same type. When the options are both calls, it is referred to as a bull call spread. If both options are puts, it is referred to as a bear put spread.
The reason this strategy is called a credit spread is that you collect credit when you enter the trade. The difference between the premiums of the options is the credit. When you buy the lower strike price option, you pay a premium. When you sell the higher strike price option, you receive a premium. Credit is the difference between the two.
Long call calendar:
A long call calendar is an options strategy that involves buying call options with different expiration dates. The trader believes the underlying asset will rise in price and wants to maximize its profit by having the option to sell at different prices.
To enter a long call calendar, the trader buys a call option with one expiration date and then sells a call option with a different expiration date. The two options must have the same underlying asset and strike price.
The long call calendar is a bullish strategy that profits if the underlying asset goes up in price. The maximum profit is unlimited as the underlying asset can continue to rise in price. The maximum loss is equal to the difference in premium between the two options.
There are some other strategies as well that a user can consider to get level 3 approval. A user must be aware of all the important steps so that there are no chances of problems later on!