When it comes to trading stocks, getting into the world of trading options can seem daunting depending on your investment experience. Fortunately, with the help of the right trading platform, trading options can be much easier – and more profitable. Webull is a trading platform with no contract fees and no minimum deposit that enables users to trade options with ease, as well as stocks and other securities. You can manage your entire investment portfolio with Webull.
In this blog post, we’ll provide an overview of the basics of trading options on Webull, so you can get started with trading options as soon as possible. We’ll cover the advantages of using Webull for trading options, how to get started trading options on Webull, and some strategies to help you maximize your profits with options trading. Whether you’re a beginner or an experienced options trader, you’ll find useful advice and resources to help you learn how to trade options on Webull.
Table of Contents
Open and fund an account with Webull
The first step to trading options on Webull is to open and fund an account with a deposit via wire transfer. This can be done online in just a few minutes and make sure you complete the short and simple options trading application during the signup process to get approval for options trading. You will need to provide basic personal and financial information, such as your name, address, Social Security number, and bank account information. Once your account is open and funded, you can start exploring the options trading tools available on Webull. Webull has both an intuitive mobile app and powerful browser-based and downloadable desktop platforms for those who prefer to trade from a computer.
When you are ready to open your Webull account it is also a good idea to read educational material on the stock market so you can learn about basic strategy, analytical tools, advanced tools, exchange fees, stock trades, options commissions, and more. You may also want to download the free Webull desktop application for more advanced charting and reporting tools. Both Webull’s mobile and desktop apps offer excellent tools for trading options contracts.
We wrote another article where you can learn more about the promotion for Webull free stock.
Learn the different types of options
Before you start trading options on Webull, you’ll need to know the different types of options that are available. The two main types of options are calls and puts. A call option grants the buyer the right to buy a certain number of shares of an underlying asset at a specific price. Meanwhile, a put option grants the buyer the right to sell the underlying asset at a specific price. Depending on the type of option you choose, you can either benefit from an increase in the price of the underlying asset or a decrease in the price of the underlying asset.
When trading stock options, one of the most popular strategies is the single-leg option. This involves buying an option with the intent of selling it immediately, usually for a higher price. Because the option holder knows exactly how much money they’re risking, this strategy is often used to speculate on a stock’s price based on past trading behavior and other variables.
There are three main types of covered options: calls, puts, and straddles.
- A call option gives the owner the right, but not the obligation, to buy a security at a set price by a specific date.
- A put option gives the owner the right, but not the obligation, to sell a security at a set price by a specific date.
- A straddle option gives the owner the right to buy a security at either the strike price or the underlying security’s price, but not both.
Investopedia has some great educational resources and investment advice to learn more about options and how to trade them:
- Options Trading Basics: https://www.investopedia.com/terms/o/option.asp
- How to Trade Options: https://www.investopedia.com/options-basics-tutorial-4583012
- Investopedia’s Beginner’s Guide to Options: https://www.investopedia.com/articles/active-trading/040915/guide-option-trading-strategies-beginners.asp
Select the option contracts you want to trade
Options trading is a forward-thinking investment strategy that can provide higher returns than traditional investments such as stocks and bonds. Forward-looking statements describe an investment’s expected performance in the future. Options traders use these statements to make informed choices about when to buy and sell options contracts. Forward-thinking statements can help you anticipate changes in the market and make smarter investments.
Once you’ve decided to trade options on Webull, the next step is to select the option contracts you want to trade. You can choose from a variety of stocks, indices, and ETFs. Before you make a selection, it’s important to research the option contracts and their respective risks. Consider the strike price, expiration date, and underlying asset of each option contract. Additionally, check the option chains to find the correct bid and ask prices. Once you have chosen your options contracts, you can move on to the next step.
Choose the expiration date of the contract
The fourth step when trading options on Webull is to choose the expiration date of the contract. This is the date by which the contract must be settled. It is important to select the correct expiration date, as the contract will be settled based on the stock price at the time the option expires. If the option expires before the desired stock price is reached, the investor will lose the entire premium paid for the contract. The expiration dates available typically range from one week to several months, giving investors several choices depending on their investment goals.
Here are some tips for choosing the expiration date of your options contract:
- Make a list of questions you need to be answered in order to make an informed decision about the expiration date for an options contract. These questions might include the following: What is the strike price of the contract? What is the expiration date? What is the underlying security’s volatility? What is the desired price of the contract?
- Use a volatility calculator to help you determine the volatility of the underlying security. This will help you to understand how much impact the movement in the underlying security’s price will have on the value of the option contract.
- Consider the desired price of the option contract when making a decision about the expiration date. The desired price is the price at which you would be willing to buy the option contract.
- Consider the strike price of the option contract when making a decision about the expiration date. The strike price is the price at which the option contract becomes exercisable.
The period of time for your options contract will vary on different factors so make sure to do your due diligence when setting the expiration date.
Decide the underlying asset you want to trade
When trading options on Webull and creating your options trading strategy, the fifth step is to decide the underlying asset you want to trade. This is the asset that the option is tied to and will be the one that you will be predicting its price movement in order to make your options trading. Common underlying assets include stocks, indexes, currencies, and commodities. It is important to thoroughly research the underlying asset and its market before placing a trade, as this will help you better understand the risks and rewards associated with the option.
When trading options, it is important to have an asset allocation plan in place. This will help you determine what options to trade, the size of your position, and the time frame you are willing to trade.
There are a few asset classes that can be traded as options, including stocks, bonds, currencies, and commodities. Each has different risks and rewards, so it’s important to understand the characteristics of the option before trading it.
The following is a link to Investopedia’s resource for learning more about options and underlying assets:
https://www.investopedia.com/terms/u/underlying-asset.asp
Choose the type of option and the strike price
The next step in trading options on Webull is to select the type of option you want to trade and the strike price. There are two basic types of options: calls and puts. A call option gives the buyer the right to buy the underlying asset at a fixed price, while a put option gives the buyer the right to sell the underlying asset at a fixed price. The strike price is the price at which the option can be exercised. Once you’ve selected the type of option and the strike price, you are ready to place your order.
Call Options
A call options contract is a contract that gives the holder the right to buy a set number of shares at a set price for a set period of time. This type of contract is typically traded to generate profits when the underlying shares increase in value. As a beginner trader, you may find trading a “call” much easier to understand and execute than trading a “put” contract because it does not require the trader to sell the shares in order to generate profits.
Put Options
A put option is a type of derivative contract that gives the buyer the right, but not the obligation, to sell an underlying security at a specified price on or before a certain expiry date. In exchange for giving up this right, the buyer pays the seller a premium. Put options are used when there are concerns about the value of a stock or other assets decreasing. The person who buys a put option can’t lose more than the cost of the put, because their worst-case scenario is to buy shares at market price. On the other hand, if shares fall below the agreed-upon strike price, the option holder will have to pay the difference to exercise. In return for this right, they are obligated to buy shares from people who want to sell them at that fixed price. Thus, in effect, they are selling people a call option on their shares.
Strike Price
The strike price for an options contract is the price at which the option can be exercised. This price is decided by the market and is usually higher than the current price of the underlying security.
The strike price is the price at which a buyer, holder, or seller of a call option can purchase or sell the underlying security. For example, if a stock is currently trading at $50, an investor can buy a call option with a strike price of $60 for $2.00. If the stock then trades up to $60, the investor can sell the call option for $10.00, making a profit of $8.00 per share ($2.00 x 4 = $8.00). As you can see, the price movement will determine your profits or losses.
When setting the strike price for an options contract on Webull, one should first assess the underlying asset and the current market conditions. Next, the investor should decide what type of options to purchase, such as a call or put option, and whether the option should be in-the-money, at-the-money, or out-of-the-money. The strike price should then be selected based on the current market price of the asset and the investor’s risk tolerance. If the investor is bullish on the asset, they should buy a call option with a strike price that is higher than the current market price. If the investor is bearish on the asset, they should buy a put option with a strike price that is lower than the market price. Once the option and strike price have been decided, the investor must enter the order on Webull to complete the transaction.
Set your order and place your trade
For your first options contract, it is recommended that you choose a single option. Once you’ve found an option contract that you wish to purchase, you’ll need to set your order and place your trade. To do this, select the “Order” tab in the top right corner of the Webull platform. Here, you’ll be able to set your order parameters, including the number of contracts, the order type, the limit price, and the time in force. Once you’ve entered all the requested information, click “Preview Order” to view the estimated cost of your order. If everything looks good, click “Confirm Order” to place your trade.
Monitor the performance of your option contract
Once you have chosen an option to trade and set up a contract, it is important to monitor the performance of your contract. On Webull, you can choose to monitor real-time option prices and view your current option positions. You should also use technical indicators and chart patterns to track the performance of your option contract. Additionally, you should use fundamental analysis to understand the underlying stock and make the best decisions around when to enter and exit your option contracts. Tracking the performance of your option contract is essential in making profitable option trades.
Investing in options contracts can be a high-risk, high-reward investment strategy. When trading options contracts, investors must weigh the potential upside against the potential losses associated with the contract, which can involve considerable risk. The capital risk associated with trading options contracts lies in potentially having to pay a high price for an option if it is exercised. If an option is exercised, the option buyer can exercise the right to buy or sell the underlying asset at the predetermined price, regardless of the current market price. Therefore, if the market price is higher than the predetermined price, the option seller will have to incur a loss. It is important for investors to understand the capital risk associated with options contracts and weigh their risk tolerance before making the decision to invest.
Get Free CBOE Index Data With Webull
The Chicago Board Options Exchange (CBOE) is one of the largest options exchanges in the world, offering a wide variety of securities and futures trading. Founded in 1973, the CBOE has experienced immense growth, with trading volume growing by over 600% since the financial crisis of 2008. As a result, the CBOE Exchange has expanded to two different trading floors.
The CBOE offers anyone with an account with a broker the ability to trade. However, not all brokers charge the same commission for trading on the CBOE. Therefore, it is important to research your broker and their commission before opening an account. Bid/ask spreads can vary from broker to broker, and the difference in spread might be worth it for some traders. However, for others, it might not be worth the extra fee for this difference. The increased commission could offset the benefits of having a narrower spread with another broker. The CBOE is more expensive than other options available, but they offer many perks that make them great to use if you have an account with a broker, like Webull, who doesn’t charge a commission on trading on the CBOE. The CBOE offers many features for brokers who want to use them, including access to real-time data, faster market updating, superior trading tools, and more.
If your broker doesn’t offer these features or you’re looking for an alternative with a higher spread (or lower commission), the CBOE is worth considering and we highly recommend using Webull to get free CBOE index data and commission-free options trading.
Conclusion
In conclusion, stock options are powerful investments that experienced investors, retail investors, active traders, retail traders, options brokers, casual investors, and advanced investors can all trade options on Webull as a great way to diversify their portfolios and increase their potential profits.
Webull offers investor protection and a wide range of options trading tools, including options chains, watch lists, and risk analysis for the options market. Plus, you can practice trading options with paper trading and get access to real-time market data. With the right strategies and risk-management practices, options trading can be a great way to build your wealth. If you don’t have much trading experience then it is always a good idea to read educational content from successful options traders before you begin commission-free options trading on Webull or one of the other mobile platforms such as Robinhood.
Here are some great resources for learning more about the stock market, assets, and trading stock options:
- Investopedia – A comprehensive resource on investing including articles, podcasts, and video lessons on everything from stock trading to indexing.
- The Motley Fool – A website dedicated to helping people make money in the stock market.
- TheStreet – A website devoted to financial news and analysis.
- The Wall Street Journal – A leading source of financial news and information.
Depending on your investment objectives, risk tolerance, option strategies and debt obligations trading options on Webull might be a great way to meet some of your financial goals.
Disclaimer on National Securities Exchanges and Trading Options on Webull
National securities exchanges are marketplaces where securities such as stocks, bonds, and derivatives are traded. These exchanges are regulated by national governments and provide liquidity, transparency, and price discovery to the market. They ensure the fair and orderly trading of securities and adherence to market rules by all participants. Beginner traders can find information about the exchanges and their respective rules online, as well as via brokers and other financial institutions. By understanding the rules and regulations of the exchanges, beginner traders can gain a better understanding of how these markets work and can make more informed decisions about their investments. You may also consider alternatives to Webull such as Robinhood’s stock trading app, you can learn more in our complete review of Robinhood vs Webull.
