US broker Robinhood has launched options trading for clients in the UK.
The company first announced that it would be adding the products for its UK customers in the final quarter of last year.
As part of the launch, clients will be able to trade options without paying any of Robinhood’s contract fees until mid-May.
Demand for options trading has risen dramatically over the last few years, something we see in surging micro and nano contract volumes trading on the CME.
The exchange-traded derivatives (ETDs) also make up the bulk of Robinhood’s trading-based revenues. In its most recent quarterly report, options trading generated $202m of the broker’s “transaction-based revenues”.
That was just over 63% of total revenues for the segment and more than double the combined revenues derived from crypto and equities trading.
One potential hurdle the broker will face is its ability to generate revenues from payment for order flow, which is prohibited in the UK market but is a key part of Robinhood’s US business model.
Options tend to generate more revenue because spreads on contracts are wider, resulting in higher rebates from market makers for companies like Robinhood.
As noted in a recent TradeInformer Newsletter, ETDs are becoming more popular in Europe and are one potential alternative for brokers if there are further clampdowns on CFDs and spread bets.