You are exactly right. The electronic options exchanges facilitate market makers paying brokers for order flow. The broker can send the order to the exchange w

You are exactly right. The electronic options exchanges facilitate market makers paying brokers for order flow. The broker can send the order to the exchange with a field denoting their preferred market maker. In the absence of that field being populated, orders are allocated either by size (% of the best bid) or by time (who established the best bid first). If that field is populated and the preferred market maker is on the best bid or best offer, he receives an outsized allocation of the order. The market maker keeps track of the number of contracts it has traded with that broker where the field was set and pays the broker whatever fee they've contractually agreed upon multiplied by the number of contracts. The market maker can afford to do this because retail order flow is highly profitable to trade against (it's "dumb money"). In fact when a market maker runs a look back analysis on the profitability of his trading, he will see that his trading with other market makers and institutional orders results in almost no profit, whereas the retail flow is highly profitable. This "payment for order flow" (PFOF) is not shared with the customer. So even if the customer pays no fee to trade, Robinhood can still earn a profit. Source: Was an electronic options trader