The quarter
Robinhood reported its third quarter on 27 October [1]. Total net revenue was $1.42 billion, up 12% on a year earlier. It came from three places: $867 million from customers trading (transaction-based revenue, up 19%), $415 million from interest on margin loans, cash and securities lending (down 9% with lower rates), and $142 million from subscriptions and other fees, mostly from the 5.2 million Robinhood Gold members (up 34%). The company has 28.7 million funded customers, $396 billion of their assets on the platform, and took in $15.7 billion of net deposits in the quarter. Revenue per customer, annualised, is about $200.
Table 1.Robinhood, quarter to 30 September 2026 [1].
| Line | Q3 2026 | Year on year | Share of revenue |
|---|---|---|---|
| Options | $399M | +31% | 28% |
| Event contracts (prediction markets) | $173M | over 6× | 12% |
| Equities | $121M | +41% | 9% |
| Cryptocurrencies | $120M | −55% | 8% |
| Other transaction revenue, not itemised | $54M | 4% | |
| Transaction-based revenue | $867M | +19% | 61% |
| Net interest revenue | $415M | −9% | 29% |
| Other revenue (Gold and fees) | $142M | +61% | 10% |
| Total net revenue | $1,424M | +12% | 100% |
| Options contracts traded | 905M | +48% | |
| Equity notional traded | $992B | +53% | |
| Event contracts traded | 16.4B | over 7× | |
| Funded customers; platform assets | 28.7M; $396B | +7%; +19% |
Inside the trading line the four products moved in different directions (Figure 1). Options earned $399 million, the largest trading line for the sixth quarter in a row. Prediction markets, which did not exist as a line two years ago, earned $173 million and overtook both equities ($121 million) and crypto ($120 million). Crypto, which was the largest line in the quarter after the November 2024 election, has fallen by two-thirds since; volume on the app was $21 billion, down 48%.
How retail trades
The volume figures describe the customer more precisely than the revenue figures. Customers traded 905 million options contracts in the quarter. Divided by the funded base, that is 31.5 contracts per customer per quarter, up from 19.0 in the fourth quarter of 2024: the same customer trades 66% more options than two years ago (Figure 2). The company does not say how many of its customers trade options at all; since most do not, the active minority trades far more than the average.
What they trade is documented from three directions. The Journal of Finance study of retail option flow in 2019 to 2021 found 69% of retail volume in calls and half of wholesaler trades in contracts with under a week to expiry [5]. Cboe's analysis of same-day index options, where retail is 50 to 60% of the flow, found over 95% of trades in defined-risk formats, long options or spreads, and about 4% naked short options [6]; same-day contracts were 62% of S&P 500 index option volume by August 2025 [7]. And US listed options as a whole cleared 15.2 billion contracts in 2025, up 24%, the sixth record in a row, 54% of them on single stocks [8].
The account behind the trading is small. Robinhood's platform assets divided by its funded customers give a mean of about $12,500 [9]; the company does not disclose a median, and the mean is pulled up by large accounts. Across the United States, the Federal Reserve's 2022 survey found 21% of families holding stocks directly, with a median holding of $15,000 [10]. Equity turnover is high: $992 billion of stock traded in a quarter against $396 billion of assets is two and a half times the book every three months.
The picture that emerges is consistent: a very large number of small accounts, trading often, in the one instrument whose downside is capped by construction, mostly on the buying side and mostly in short-dated contracts. Everything else in this note follows from that customer meeting the contract they are sold.
How the broker is paid, in context
Robinhood charges no commission on stock or equity-option trades. Its trading revenue is, in the words of its own annual report, payment for order flow and transaction rebates: market makers pay the broker for the right to execute its customers' orders, and exchanges rebate part of their fees on orders routed to them [11]. The market maker earns the difference between the bid and the offer at which it fills the order, and passes part of it to the broker.
The arithmetic for options is visible in the company's own numbers: $399 million over 905 million contracts is 44 cents a contract, down from 51 cents at the 2025 peak, as the mix has moved toward cheaper, shorter-dated contracts that earn the broker less each (Figure 3). The payments are public under Rule 606. Across the industry they reached $1.004 billion for options alone in the second quarter of 2026, the first quarter above a billion dollars [12]; Robinhood's $342 million of options revenue that quarter was about a third of the total. The payers are a short list: Citadel Securities, IMC, Wolverine and Susquehanna, which between them paid most of the industry's options order flow in the last quarter for which the names were compiled [13].
Two facts keep this in proportion. Payment for order flow is how commission-free trading is paid for, and the customer's cost is the spread, not a fee: the SEC's 2020 order found Robinhood's customers lost $34.1 million to inferior execution prices over three years, against commissions that would have been far larger [14]. Regulators disagree about whether that trade-off is fair: the European Union prohibited the practice under MiFIR from 2024, with Germany's transition ending on 30 June 2026 [15], while the SEC proposed order-by-order auctions in 2022 and withdrew the proposal in 2025. What the arithmetic does establish is narrower: the broker's options revenue rises with the number of contracts its customers trade, not with how those trades turn out, and the cheapest, most-traded contracts are the ones that generate the most of it.
The global market
Everything above is the American experience. The United States cleared 15.2 billion options contracts in 2025, 54% on single stocks, open to anyone with a US brokerage account between 9:30 and 16:00 Eastern time, plus two extra hours on 29 names since Cboe's extension in October 2026 [8, 16]. The world traded 88.6 billion contracts the same year [17]; most of the difference is index options in Asia, in sizes and under rules that keep the individual at the edge. Table 2 gives the four largest retail populations outside the United States.
Table 2.Single-stock options for individuals outside the United States.
| Retail investors | Single-stock options | The gate | |
|---|---|---|---|
| India | 210m demat accounts, December 2025 [18] | listed, but index options dominate | minimum index contract raised to Rs 15–20 lakh ($18,000 to $24,000) in November 2024, weekly expiries cut to one index per exchange [19]; 93% of individual derivatives traders lost money over the prior three years [20]; overseas derivatives closed under the remittance rules [21] |
| China | over 250m investors, 2025 [22] | none listed for individuals; ETF and index options only | 500,000 yuan in assets and a written exam to open an options account (SSE, since 2015) [23]; capital controls on overseas accounts |
| Korea | 14.6m stock investors, 99% individuals, end 2024 [24]; $200bn of US stocks held, May 2026 [25] | a local market centred on the KOSPI 200 index | US options only through a broker that offers them, in New York hours, in 100-share contracts |
| European Union | 450m people | Eurex single-stock options in 100-share lots on the largest names; US options through brokers that supply a key information document | no US ETFs for retail since PRIIPs, 2018 [26]; payment for order flow banned, so execution is priced explicitly [15] |
The Korean figure is the one to hold onto: a fifth of a trillion dollars of US stock, held by households whose waking hours are New York's night, with no instrument to hedge it in Seoul's day. The Indian one is the size problem made policy: the regulator tripled the minimum contract to keep small traders out of a market that had lost them about $21 billion in three years.
Liquidity and the account balance
Two things set what a retail account can actually do: where its orders are filled, and how much is in it.
Where the orders go is the market makers above. For a liquid contract near the money, in the session, the spread they charge is a few cents on a multi-dollar option. For the cheap, short-dated, out-of-the-money contract that a small account is steered toward, the same few cents are a large share of the price, which is why the retail losses in the studies cited concentrate there [5]. Outside the session the question is not the spread but the quote: a listed option on a single stock cannot be hedged after 16:00, so it is not quoted, and the holder of a position waits for the open. The underlying that does trade through the night is the perpetual future. Hyperliquid's perps on stocks, indices and commodities traded $61 billion in September, and 60% of the equity-perp volume trades outside US market hours [27], which is why a chain of options quoted on those perps (Iridium's, in public test) can be hedged at three in the morning and a listed one cannot.
How much is in the account decides the rest. Figure 4 prices one at-the-money call about a month out on 17 of the most traded names, from the quotes on Iridium's chain, against the $12,500 account and a 1% risk budget of $125. As published, the quotes are from after the close on 2 November, with 32 days to the 4 December expiry; the figure shows them live by default, and its account can be changed.
On 2 November not one of the 17 fit the budget. The cheapest, Netflix after its split, was $237; the median was $1,142, nine times the budget; NVIDIA was $879, Tesla $2,398, Meta $3,759, Eli Lilly $6,109, SanDisk $10,237. The trader with $125 does not go home; they buy what $125 buys, which is the same name further out of the money or closer to expiry, the contract with the worst odds in the chain and the widest spread as a share of its price. The 100-share unit does not keep small accounts out of options. It decides which part of the chain they trade.
Selling options as a small account
The premium that buyers pay is collected by sellers, and the long record favours the seller: Cboe's PUT index, which sells one at-the-money one-month S&P 500 put each month against cash, returned 9.40% a year from July 1986 to August 2023 against 9.91% for the index, with two-thirds of the volatility and a maximum drawdown of 33% against 51% (Figure 5) [28]. Since 2013 implied volatility has exceeded subsequently realised volatility by 3.33 points on average; that gap is the seller's income and the buyer's cost.
Selling is where the capital requirements are, because the seller must be able to deliver (Table 3). A covered call requires 100 shares per contract. A cash-secured put requires the cash to buy 100 shares at the strike. A credit spread requires a margin account ($2,000 under Regulation T), broker approval at level 3, and margin equal to the spread's width times 100. Uncovered selling requires level 4, granted on income, net worth and experience, which most accounts never reach.
Table 3.What it takes to sell options in a US retail account.
| To sell | Collateral per contract | Gate |
|---|---|---|
| Covered call | 100 shares of the stock | approval level 1 |
| Cash-secured put | cash for 100 shares at the strike | level 1 or 2; cash account allowed |
| Credit spread | margin for the width × 100 | level 3; margin account, $2,000 minimum |
| Uncovered call or put | margin on the full exposure | level 4; income and net-worth tests |
Figure 6 prices the first two against the average account. On 2 November, of the 17 names, it could write a covered call on three (Robinhood, Netflix and Intel), each taking about half the account or more in one stock; on the other fourteen a single contract was larger than the account, from 110% (Coinbase) to 1,131% (Eli Lilly).
What small accounts do instead is well known on the forums where they gather. They sell credit spreads, which cap the loss and the collateral at the width of the spread; they run the "poor man's covered call", a long-dated call standing in for the 100 shares with a short call against it, which still needs the long leg (about a third of the account on NVIDIA, for a January 2028 at-the-money call); and they run the "wheel", cash-secured puts followed by covered calls, on whichever stocks are cheap enough to own a hundred of. Each is a workaround for the same constraint. At one share per contract the constraint goes: a covered call on NVIDIA needs one share, $202, 1.6% of the account, and pays the same yield per share that the $20,242 position pays its owner. The risks of selling do not change, and no venue should let a retail account sell uncovered; the one-share unit changes who can sell covered.
Hedging: stock, options and perps
Robinhood's customers hedge in four ways that the listed market allows: a protective put against a stock position; a covered call, which gives up upside for income and a small cushion; a collar, which is both; and an index put, usually on SPY, as a proxy for the whole account. Since 2025 the company has also offered CME futures, including the micro contracts, and perpetual futures to European customers through Bitstamp, which adds a fifth position to hedge: the leveraged one.
All four stock hedges meet the unit. A customer holding ten shares of NVIDIA, a $2,024 position on 2 November, cannot buy a put on ten shares. One listed put covers 100 shares and cost $879 at the money, 43% of the position; ten one-share puts cover exactly ten shares for $88, 4% (Figure 7). The listed alternatives are to over-hedge ten times, which turns the position into a short, to hedge with an index put and carry the basis, or not to hedge. Most small accounts do the last. The hedge also sits in a separate box: in a retail account the stock and its put are margined under strategy rules, not as one risk, and after 16:00 neither leg can be adjusted until the next open.
The leveraged position is the hardest to hedge and the one that needs it most. A perpetual future at ten times leverage is liquidated when the price touches a level, not when it finishes there; over thirty days at a 40% volatility the probability is about 38% by the reflection principle, with , and , whatever the trader's view turns out to be worth at the end of the month. On 10 October 2025 one tariff headline liquidated $19.3 billion of crypto positions, 1.66 million traders, 87% of them long, in an afternoon [29]. The instrument that caps that loss is a put on the same underlying, and on a perpetuals venue there has been none to buy: the stop order is the only tool, and a stop is a barrier that executes at whatever price comes next.
Table 4 lays the five hedges side by side: on the listed market, and on a chain of one-share options quoted on Hyperliquid's perpetuals in one margin account, which is what Iridium runs in its public test. The differences are mechanical. The unit is one share, so the hedge is the size of the position. The option and the perp sit in one account and are margined as the pair's maximum loss rather than the sum of the legs, which is the portfolio-margin treatment retail accounts do not get. And both legs trade at every hour, so the hedge can be put on at 16:05 when the guidance changes, not at 9:30 the next day.
Table 4.Five retail hedges: the listed market against one-share options on perpetual futures. Prices from 2 November 2026.
| Hedge | Listed market (Robinhood and peers) | One-share options on the perp (Iridium on Hyperliquid) |
|---|---|---|
| Protective put on a stock | one put covers 100 shares; a 10-share holder over-hedges 10× or uses an index proxy; 9:30 to 16:00 | one put covers one share; exact size; the perp stands in for the stock; 24/7 |
| Covered call | needs 100 shares ($20,242 on NVIDIA) | needs one share ($202) |
| Collar | 100 shares, two listed contracts | one share, two one-share contracts |
| Index put on the account | SPY put, $75,454 of notional per contract; basis to the holdings | S&P 500 perp option, one index unit; basis to the holdings is the same problem |
| Hedge on a leveraged position | futures and perps in separate accounts from the options; no option on a crypto perp; a stop is the tool | the put on the same perp, in the same account, margined as one risk; the loss is capped as a terminal condition, not a barrier |
What the quarter says
- Options are the retail instrument. One broker's customers traded 905 million contracts in a quarter, 66% more per account than two years ago, and options are now that broker's largest line of trading revenue.
- The customer is small and active: a $12,500 average account turning over its equities two and a half times a quarter, trading mostly short-dated calls in defined-risk formats.
- The broker is paid by the contract, through the spread the market maker earns, at 44 cents each. That funds commission-free trading; it also means revenue follows the count of trades, not their outcome.
- Outside the United States the same customer meets an index-only market, a size floor, an asset test or a border, and usually more than one.
- The 100-share contract decides three things: which part of the chain a small account can trade (the cheap, short-dated part), which strategies it can run (buying, not selling), and whether it can hedge at all (not at the size it holds).
- A one-share contract on an underlying that trades every hour removes the unit from each of those three decisions. It does not change the odds of a lottery ticket. It changes whether the trader can buy the strike they want, sell the premium the market pays, and hedge the position they have.
Notes
- Quotes in Figures 4, 6 and 7 are house quotes on perpetual-future underlyings from Iridium's public test, with mock collateral. As published they are from 2 November 2026 after the US close, on the 4 December expiry; live, they are the current quotes on the non-daily expiry nearest 32 days. The at-the-money option is taken as half the at-the-money straddle at the mid, and SPY as the S&P 500 perp's level divided by ten.
- The options revenue per contract in Figure 3 is each quarter's reported options revenue over its reported contracts.
- The long-dated NVIDIA call for the poor man's covered call is the January 2028 at-the-money call's ask on Iridium's chain, about 20% of spot at the end of October.
- Rupee conversions use Rs 85 per dollar.