Ready to dive into the exciting world of options trading on Webull? Selling options can be a powerful strategy to generate income, but it comes with its own set of risks. This comprehensive guide will walk you through the process step-by-step, helping you understand how to navigate Webull's platform and implement various selling strategies.
Let's begin our journey into options selling!
Understanding the Basics of Selling Options
Before we jump into the "how-to," it's crucial to grasp what selling options entails. When you sell an option, you are becoming the writer or seller of that contract. This means you are obligating yourself to either buy or sell an underlying asset at a specified price (the strike price) on or before a certain date (the expiration date), in exchange for receiving an immediate payment called a premium.
There are two main types of options you'll encounter:
Call Options: A call option gives the buyer the right to buy the underlying asset. When you sell a call option, you are obligated to sell the underlying asset at the strike price if the buyer chooses to exercise their right. This strategy is typically employed when you believe the underlying asset's price will remain flat or decrease, or if you own the underlying asset and want to generate income (covered call).
Put Options: A put option gives the buyer the right to sell the underlying asset. When you sell a put option, you are obligated to buy the underlying asset at the strike price if the buyer chooses to exercise their right. This strategy is often used when you are bullish on a stock and are willing to buy it at a lower price, or if you simply want to collect premium.
Remember, the premium you receive is your maximum profit for selling a single option contract. However, the potential loss can be significant, especially with "naked" (uncovered) options, as the price of the underlying asset can move indefinitely.
Step 1: Get Approved for Options Trading on Webull (If You Haven't Already!)
This is the very first and most crucial step. You can't sell options on Webull without specific approval. Have you already gone through the options trading application process? If not, let's get you set up!
Sub-heading: Navigating the Application Process
Open the Webull App: Launch the Webull application on your mobile device.
Access Settings: Tap on "Menu" (usually located at the bottom right). Then, navigate to "Settings" below your profile.
Manage Brokerage Account: Within "Settings," select "Manage Brokerage Account."
Options Trading: Look for and tap on "Options Trading."
Enter Trading Password: You'll likely be prompted to enter your trading password for security.
Enable Options Trading: Toggle on or select "Open Options Trading."
Complete Assessment & Tick Fields: Webull often requires you to complete an "ETO Assessment" (Options Trading Assessment) to evaluate your knowledge of options. You'll also need to tick necessary fields and agree to disclosures. Be honest and thorough in your answers, as this determines your approval level for different options strategies.
Submit Application: Tap "Submit."
Note: Your application is subject to approval, and Webull has specific age requirements (e.g., generally 21 years old in the US). Different approval levels grant access to different options strategies. Selling naked options typically requires the highest approval level due to the associated risks.
Step 2: Fund Your Webull Account
Even after approval, you'll need capital to execute options trades.
Check Your Balance: Once logged in, go to your account overview to see your current buying power.
Initiate a Deposit: If you need to add funds, look for options like "Deposit" or "Transfer."
Choose Your Method: Webull typically offers various deposit methods, including:
ACH Transfer (Automated Clearing House): This is a common and usually free method, though it might take a few business days for funds to clear.
Wire Transfer: Faster than ACH but often incurs fees from your bank.
Micro-deposits: For initial verification, small deposits might be made to your bank account, which you'll then verify on Webull.
Remember, while Webull has no minimum deposit, the specific options strategies you want to employ (especially selling puts or covered calls) will require sufficient capital or underlying stock to cover potential obligations.
Step 3: Research and Select Your Underlying Asset
Now for the fun part: choosing what you want to trade!
Navigate to Markets/Watchlist: On Webull, you can browse popular stocks, ETFs, or go to your personalized watchlist.
Search for a Ticker: Use the search bar to find the specific stock or ETF you're interested in.
Analyze the Underlying:
Understand the Company: Research the company's fundamentals, recent news, and future outlook. Why do you believe this stock is a good candidate for selling options?
Technical Analysis: Look at charts, indicators, and trends to understand potential price movements.
Volatility: Consider the implied volatility (IV) of the options. Higher IV generally means higher premiums for sellers, but also higher risk.
For selling calls, you might look for stocks you expect to be flat or slightly down. For selling puts, you'd typically want a stock you're bullish on and wouldn't mind owning at a lower price.
Step 4: Access the Options Chain
Once you've selected your underlying asset, it's time to view the available options contracts.
Tap "Options": On the stock's detail page, you'll see a tab or section labeled "Options." Tap on it.
Explore the Options Chain: This is where you'll see a table of all available call and put contracts for various expiration dates and strike prices.
Expiration Dates: Choose an expiration date that aligns with your trading horizon. Shorter-term options generally decay faster, which can be beneficial for sellers, but they also react more quickly to price changes.
Strike Prices: These are the prices at which the option can be exercised.
In-the-Money (ITM): For calls, strike price is below current stock price. For puts, strike price is above current stock price.
At-the-Money (ATM): Strike price is very close to the current stock price.
Out-of-the-Money (OTM): For calls, strike price is above current stock price. For puts, strike price is below current stock price.
Bid and Ask Prices: The bid is the highest price a buyer is willing to pay, and the ask is the lowest price a seller is willing to accept. The difference is the spread.
Greeks: Webull provides real-time Greeks (Delta, Gamma, Theta, Vega), which are crucial for options analysis.
Theta (Time Decay): This is your friend as an option seller! Theta measures how much an option's price decays each day as it approaches expiration.
Step 5: Choose Your Selling Strategy
This is where the actual "selling options" begins. Webull supports various options selling strategies. Here are the most common ones for beginners:
Sub-heading: Selling Covered Calls (for Income Generation)
This is one of the most popular and relatively lower-risk strategies for options sellers. You must own at least 100 shares of the underlying stock for every call contract you sell.
Ensure You Own 100 Shares (or Multiples): Go to your positions to verify you hold the required number of shares.
Select a Call Option: In the options chain for your chosen stock, navigate to the "Calls" section.
Choose Expiration and Strike Price:
Expiration: Pick an expiration date you're comfortable with.
Strike Price:
Out-of-the-Money (OTM): This is generally preferred for covered calls if you want to keep your shares. If the stock stays below the strike at expiration, you keep the premium and your shares.
At-the-Money (ATM) or In-the-Money (ITM): These offer higher premiums but increase the likelihood of your shares being "called away" (assigned).
Tap the "Bid" Price: To sell a call option, you'll generally tap the "Bid" price for the chosen strike and expiration. This signifies you want to sell the option at the highest price buyers are currently offering.
Configure Your Order:
Direction: Ensure "Sell" is selected.
Strategy: Webull might automatically recognize it as a "Covered Call" if you own the shares.
Number of Contracts: Input the number of contracts you wish to sell (1 contract = 100 shares).
Order Type:
Limit Order: Highly recommended for selling options. You specify the exact premium you want to receive. Your order will only execute if someone is willing to pay that price or higher.
Market Order: Executes immediately at the best available price. Avoid for options, as spreads can be wide, leading to unfavorable fills.
Time-in-Force: "Day" (expires at end of trading day) or "GTC" (Good-Til-Cancelled).
Review and Place Order: Double-check all details (ticker, expiration, strike, type, quantity, premium, order type). Confirm you understand the maximum profit (premium received) and potential outcome (shares called away or option expires worthless). Then, "Send Order."
Sub-heading: Selling Cash-Secured Puts (for Stock Acquisition or Income)
This strategy involves selling a put option and having enough cash in your account to buy the underlying stock if you are assigned. You are essentially agreeing to buy shares at the strike price if the stock falls below it by expiration.
Ensure Sufficient Cash: You need enough cash to buy 100 shares per contract at the strike price. For example, if you sell a $50 put, you need $5,000 readily available.
Select a Put Option: In the options chain for your chosen stock, navigate to the "Puts" section.
Choose Expiration and Strike Price:
Expiration: Select an appropriate expiration date.
Strike Price:
Out-of-the-Money (OTM): Generally preferred if your goal is to acquire the stock at a discount or simply collect premium without assignment. This means you want the stock to stay above the strike price.
At-the-Money (ATM) or In-the-Money (ITM): These offer higher premiums but increase the likelihood of assignment.
Tap the "Bid" Price: To sell a put option, tap the "Bid" price for your chosen strike and expiration.
Configure Your Order:
Direction: Ensure "Sell" is selected.
Strategy: Webull might identify it as a "Cash-Secured Put."
Number of Contracts: Input the number of contracts.
Order Type: Limit Order is highly recommended.
Time-in-Force: "Day" or "GTC."
Review and Place Order: Verify all details. Understand that your maximum profit is the premium received, but if assigned, you will be obligated to buy 100 shares per contract at the strike price, regardless of how low the market price goes. "Send Order."
Important Note: Selling "naked" calls or "naked" puts (without owning the underlying asset or having enough cash to cover) carries unlimited risk for naked calls and substantial risk for naked puts, and typically requires a higher options approval level and a margin account. It is not recommended for beginners.
Step 6: Monitoring Your Options Position
Once your order is filled, your options position will appear in your Webull account.
Check Positions Tab: Go to the "Positions" tab in your Webull app.
Monitor Performance: You'll see your current profit/loss, the option's current bid/ask, and the remaining time until expiration.
Track the Underlying Asset: Keep an eye on the stock's price movements.
Watch the Greeks: Especially Theta (time decay, which works in your favor) and Delta (how much the option price changes with the underlying).
Step 7: Managing and Closing Your Options Position
You have several options for managing your sold contracts:
Sub-heading: Letting Options Expire Worthless
Best-Case Scenario: If the option you sold expires out-of-the-money, it becomes worthless. You keep the entire premium as profit, and your obligation disappears. No further action is required from you.
Sub-heading: Buying to Close (Taking Profit or Cutting Losses)
Locate the Option: Find your sold option in the "Positions" tab.
Tap to Close: Select the option, and you'll typically see a "Close Position" or "Buy to Close" option.
Configure Buy Order:
Direction: Ensure "Buy" is selected.
Number of Contracts: Enter the number of contracts you want to close.
Order Type: Limit Order is best. You want to buy back the option for the lowest possible price.
Review and Place Order: Confirm details and "Send Order."
Why Buy to Close?
To lock in profit: If the option's value has decreased significantly (e.g., due to time decay or favorable stock movement), you can buy it back for less than you sold it for, pocketing the difference. This reduces the risk of unexpected price swings or assignment closer to expiration.
To cut losses: If the trade moves against you and the option's value increases, buying to close limits your potential loss.
Sub-heading: Rolling Your Position (Adjusting Expiration or Strike)
Rolling an option involves closing your current position and opening a new one with a different expiration date and/or strike price. This is often done to extend the trade, adjust your outlook, or collect more premium.
Locate the Option and Select "Roll": Similar to buying to close, but look for a "Roll" option.
Choose New Parameters: Select a new expiration date and strike price for your new sold option.
Review and Place Order: Webull will combine the "buy to close" and "sell to open" into one transaction.
Rolling can be a more advanced technique, so ensure you understand the implications before using it.
Risks Associated with Selling Options
It's vital to understand the risks involved:
Unlimited Loss Potential (Naked Calls): If you sell a call option without owning the underlying stock (a "naked call"), and the stock price skyrockets, your losses are theoretically unlimited as you'd have to buy the stock at a high market price to fulfill your obligation.
Substantial Loss (Cash-Secured Puts): While the loss is capped (down to the strike price minus premium), if the stock plummets, you could be forced to buy shares at a much higher price than the current market value.
Early Assignment: Especially with American-style options, you can be assigned at any time before expiration if the option is in the money. This means your shares could be called away (covered calls) or you could be forced to buy shares (cash-secured puts) unexpectedly.
Opportunity Cost: For covered calls, if the stock surges past your strike price, your profit is capped, and you miss out on further gains from your shares.
Complexity: Options trading can be complex. Misunderstanding strategies or market dynamics can lead to significant losses.
Liquidity: Some options contracts, especially for less popular stocks or distant expirations/strikes, might have low trading volume, making it difficult to enter or exit positions at favorable prices.
Webull Options Trading Fees
Webull generally advertises zero commissions and zero per-contract fees for equity options. However, regulatory and exchange fees may still apply. For index options, a small per-contract fee (e.g., $0.55 per contract) might apply. Always check Webull's official pricing page for the most up-to-date fee schedule.
10 Related FAQ Questions
How to Get Higher Options Approval on Webull?
To potentially get a higher options approval level, you typically need to demonstrate more trading experience, financial sophistication, and a higher net worth during your options trading application process. Ensure you answer the assessment questions thoroughly and accurately, reflecting a strong understanding of complex options strategies and their associated risks.
How to Check My Options Approval Level on Webull?
You can usually check your options approval level by going to "Menu" > "Settings" > "Manage Brokerage Account" > "Options Trading" within the Webull app. Your current level will typically be displayed there.
How to Sell a Call Option on Webull?
To sell a call option on Webull, navigate to the stock's options chain, select the call side, choose your desired expiration and strike price, and then tap the bid price. Configure your order as a "Sell" order, ideally with a limit price, and submit.
How to Sell a Put Option on Webull?
To sell a put option on Webull, go to the stock's options chain, select the put side, choose your desired expiration and strike price, and tap the bid price. Configure your order as a "Sell" order, typically as a cash-secured put, with a limit price, and submit.
How to Close an Options Position on Webull?
To close a sold options position, go to your "Positions" tab, find the specific option contract, and select "Close Position" or "Buy to Close." You will then place a "Buy" order for the same contract, ideally using a limit order, to exit the trade.
How to Roll an Options Position on Webull?
To roll an options position on Webull, locate your existing sold option in the "Positions" tab. Look for a "Roll" option. This will typically guide you through closing your current position and opening a new one with a different expiration and/or strike price, often in a single combined order.
How to Calculate Profit/Loss on Sold Options on Webull?
For a sold option, your maximum profit is the premium received. Your profit/loss is calculated by the difference between the premium received when you sold the option and the premium paid (if any) when you bought it back to close the position, minus any fees. If assigned, the profit/loss is calculated based on the difference between the strike price and the stock's price at assignment, adjusted by the premium received.
How to Avoid Early Assignment on Webull?
While you cannot entirely prevent early assignment on American-style options, you can reduce the likelihood by closing your in-the-money options before expiration, especially if they are deep in-the-money or if there's a dividend approaching for a call option.
How to Use Limit Orders for Selling Options on Webull?
When selling options on Webull, always choose "Limit" as your order type. This allows you to specify the minimum premium you are willing to receive for selling the contract. Your order will only execute if the market price reaches your specified limit or higher, ensuring you get a favorable fill.
How to Practice Selling Options on Webull with Paper Trading?
Webull offers a robust paper trading feature, which is an excellent way to practice selling options without risking real money. Access paper trading from your "Menu" and then select "Paper Trading." Here, you can execute mock options trades and get comfortable with the platform and strategies before using your live account.
