Robinhood Gold is the premium membership offering from Robinhood. It costs $5 per month, and its core features are:
- Research reports from Morningstar
- Level 2 quotes
- Increase your instant deposit limit
- Extended hours trading (pre-market and after hours)
- $1,000 of additional margin
Changes to Robinhood Gold
Robinhood changed their Gold offering back in April 2019, and the primary difference was their structuring of how their clients pay for margin. The initial iteration of Robinhood Gold charged clients a flat monthly fee for their Gold membership based on how much margin they’d like to utilize.
Robinhood has since changed this and made Gold a flat-fee membership, regardless of account size. Now, all Gold members get access to $1,000 of margin if they meet the criteria to utilize margin.
Instead of making margin the core offering of Gold, Robinhood shifted their focus to offering more trading and research tools like research reports and level 2 quotes to members.
Are Robinhood Research Reports Worth it?
It’s critical to note that Robinhood isn’t writing the reports they supply to Gold clients. They’ve partnered with Morningstar, one of the largest investment research firms. Gold clients have access to premium company research reports.
Morningstar provides quality research and is an excellent way to get a decent understanding of a company. However, you have to understand that these reports simply aggregate publicly available information from SEC filings, press releases, and news.
There’s no inherent edge in the information.
In order to be right in a big way when investing, you need to have a view that the rest of the market doesn’t have.
Whether that’s because you’re a contrarian or because you see something that the rest of the market doesn’t. If the market agrees with you, then your view is mostly factored into the price.
So while these reports can inform you about companies so you can potentially form a unique perspective, the information within isn’t proprietary in itself in the way that a buy-side (think hedge funds) report might be.
You shouldn’t treat a favorable rating from Morningstar as a reason to immediately buy the stock.
Analyst reports from Morningstar are meant to be a primer on a company to help you understand where it’s valuation and financials stand relative to its sector and the broad market and a 30,000-foot view of the bull and bear cases.
It’s also vital to note that other brokers like Charles Schwab offer Morningstar and other research reports entirely free for clients without monthly membership fees.
Robinhood Gold and Level 2 Quotes
Level 2 quotes are one of Robinhood Gold’s biggest value propositions. If you’re unfamiliar with level 2 quotes, they show a depth of bids and offers for stocks. A level 1 quote tells you the last price traded, and the current best bid and ask.
Level 2 quotes display not only the current bid and ask, but the open orders at all prices.
In a desktop trading platform like ThinkOrSwim, a level 2 screen looks like this:
Here’s a breakdown of what you’re seeing:
- The “Ex” column stands for exchange. There are several different exchanges where traders route their orders, as you can see by the dozen or so different exchanges involved in bidding/offering Apple stock.
- The “bid” column is the bid price. It’s a price that a buyer is bidding for the stock.
- The “Ask” column is the ask price. It’s the price that a buyer is offering the stock at.
- The “BS” column stands for bid size. The numbers are in the hundreds. 4 means 400 shares are bid or offered.
Here’s how level 2 quotes in Robinhood look:
Source: Robinhood Blog
The only piece of information omitted by Robinhood is the exchange quoting the stock, which is pretty irrelevant to Robinhood traders because they don’t have direct market access anyways.
With direct market access, you might see that ARCA is offering a stock at $10.50, so you directly route your order to the ARCA exchange to trade with that order.
How To Use Level 2 Quotes?
Traders primarily use level 2 quotes to identify very short-term supply and demand. Practitioners claim that shifts in supply and demand show up on level 2 and time & sales before you see it on a chart.
Before electronic trading technology became ubiquitous, skillful analysis paid steep dividends.
You were able to spot out large orders with relative ease and ride the momentum they created. If the order didn’t move the stock, you could always lean on the order to get out unscathed.
Things have changed, and everyday retail traders can cloak their orders on the level 2 effectively using tools offered by retail brokers like Interactive Brokers. As such, the effectiveness of these order flow strategies is debated among the trading community.
That’s not to say that there aren’t tons of traders who still see significant success trading order flow using level 2 quotes.
Increased Instant Deposits
Depositing money into a brokerage account using an ACH (automated clearing house) transfer typically takes about five days for the transfer to clear. Many brokers allow you limited access to the funds in the meantime, but with restrictions on riskier trades like options and lower-priced stocks.
Robinhood allows all clients an instant deposit limit of $1,000, regardless of your Gold status. On the other hand, Gold members can increase their instant deposit limit based on their account balance. According to Robinhood’s documentation, these are the current tiers:
- “$50k instant deposit limit if your portfolio value is over $50k
- $25k if your portfolio value is over $25k
- $10k if your portfolio value is over $10k
- $5k for every other Gold user.”
Because the average Robinhood client has a relatively small account balance, this feature makes a lot of sense.
It’s worth noting that there are several options with other brokers to instantly access your deposit, among them is through a wire transfer, which typically costs around $25 domestically. Many brokers like Schwab and Interactive Brokers also offer “Bill Pay” deposits, which usually clear within a business day.
Extended Hours Trading
Without Robinhood Gold, you cannot transact outside of Regular Trading Hours (RTH), which are 9:30 – 16:00 New York time.
Many Robinhood traders prefer highly volatile stocks, which often make big moves on news both during extended hours trading, so this is a vital feature.
This should be a standard feature of any brokerage that has active traders among their clientele if you ask me. I can’t think of a mainstream brokerage firm (Schwab, Fidelity, Interactive Brokers, TD Ameritrade, etc.) that makes traders pay for the privilege to trade during extended hours.
Keep in mind that liquidity is ordinarily very thin during extended hours trading, and it’s challenging to get your order filled.
Margin on Robinhood Gold
Robinhood Gold offers $1,000 of margin interest-free with the membership. Of course, it’s not actually interest-free because you’re paying a membership fee, but if you value the other features, then the access to margin is a nice bonus.
Any other margin utilized is subject to a 5% annualized interest rate. This rate is lower than many discount brokerages like TD Ameritrade and Schwab, but significantly higher than Interactive Brokers.
The question of “brokerage firm is best” indeed varies on your personal needs as a trader or investor. Since the dawn of zero-commission trading at most large discount brokerage firms, Robinhood’s value proposition has been considerably reduced.
The larger brokers by and large offer more resources than Robinhood and most of them offer everything included with Robinhood Gold and more for free.
However, there are reasons, like zero-commission options trading (as opposed to roughly $0.65/contract charged across the rest of the industry) and the app’s ease of use, that one would choose Robinhood.
Credit: Warrior Trading