Here's how Robinhood is raking in record cash on customer trades — despite making it free

Despite not charging customers to trade, the Silicon Valley start-up made $180 million off trades in the second quarter — roughly double from the prior year, according to a recent Securities and Exchange Commission regulatory filing. The majority of that total came from options trading.Robinhood, and the rest of the online brokerage industry, rely on what's known as payment for order flow as their profit engine in lieu of commissions.

"All market makers we have relationships with pay us at the same rate. We have relationships with a number of market makers in an effort to optimize speed and execution quality," a Robinhood spokesperson told CNBC. TD Ameritrade and Robinhood make by far the most off of options at 58 cents. Schwab and E-Trade make 37 cents and 46 cents, respectively. According to the disclosures, Robinhood saw the biggest increase quarter over quarter of any brokerage firm, with order flow nearly doubling.

Because options are traded less frequently, there's a larger spread between the bid, or the price buyers are willing to pay, and the ask, or the price sellers want, said Tim Welsh, founder and CEO of wealth management consulting firm Nexus Strategy. Welsh said retail brokers "without a doubt" steer customers to options trades since those provide the bigger payday.

Not realizing they're getting Hoodwinked by the Wall Street smart money.

Robinhood is raking in more candy than ever on customer trades as new investors flood the stock market.

Smells like a top to me! CashIsKing.

mincemeat

She broke the work of art!

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Because stocks only go up!

you'll be sorry 👎

Yeah I'm not doing Robin Hood after that one kid killed himself over it.

It’s bad enough to hear those terrible commercials but when your crew is broadcasting from home it’s not that hard for them to shut off their notifications. jimcramer pls get them inline over there

LOL Robinhood

Citadel front runs order flow. Saved you a click

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