Have you ever considered diving into the exciting, yet sometimes complex, world of options trading? Webull offers a fantastic platform for both beginners and experienced traders to explore call and put options. If you're ready to learn how to leverage these powerful financial instruments, you've come to the right place!
This comprehensive guide will walk you through every step of buying calls and puts on Webull, from setting up your account to placing your first trade and understanding the nuances of these contracts. Let's get started on your options trading journey!
Understanding the Basics: Calls and Puts
Before we jump into the "how-to," it's crucial to grasp what call and put options actually are. Think of them as contracts that give you the right, but not the obligation, to buy or sell an underlying asset (like a stock) at a specific price (the strike price) on or before a certain date (the expiration date).
Call Option: Imagine you believe a stock, currently trading at $100, is going to surge in price. You could buy a call option. This gives you the right to buy that stock at a set strike price (e.g., $105) before a certain date. If the stock goes above $105, you can exercise your option, buy at $105, and immediately sell at the higher market price, profiting from the difference. Your potential profit is theoretically unlimited as the stock price can keep rising.
Put Option: Conversely, if you think a stock, currently at $100, is going to drop significantly, you might buy a put option. This gives you the right to sell that stock at a set strike price (e.g., $95) before a certain date. If the stock falls below $95, you can exercise your option, sell at $95 (even if the market price is lower), and profit from the decline. Your maximum profit is limited to the strike price minus the premium paid (as a stock can't go below zero).
Remember, for both calls and puts, you pay a "premium" to acquire this right. This premium is the cost of the option contract. If the stock doesn't move as you anticipated and the option expires "out of the money," you simply lose the premium you paid. This inherent risk is why understanding options is paramount.
Step 1: Setting Up Your Webull Account and Getting Options Approved
Ready to open the door to options trading? This is your very first, and most critical, step!
Sub-heading: Account Creation and Funding
Download the Webull App or Visit the Website: The Webull platform is accessible via its mobile app (iOS and Android) and desktop application. Choose the one that best suits your trading style.
Sign Up for a New Account: Follow the on-screen prompts to create your account. You'll need to provide personal information such as your name, address, Social Security Number, and employment details. This is standard for brokerage accounts.
Fund Your Account: Once your account is open, you'll need to deposit funds. Webull offers several methods, including ACH transfers, wire transfers, and micro-deposits. ACH transfers are usually the most common and convenient. Keep in mind that while Webull doesn't have a minimum deposit, some promotions might require a certain amount to qualify for free stocks.
Sub-heading: Applying for Options Trading Permission
Even with a funded account, you won't be able to trade options immediately. You need to apply for options trading privileges, which involves a brief application process that assesses your trading experience and financial situation.
Navigate to the Options Trading Application:
On the Webull App: Tap "Menu" (bottom right) -> "Settings" -> "Manage Brokerage Account" -> "Options Trading."
On the Desktop Platform: Look for a similar section, usually under "Account" or "Settings."
Complete the Application: You'll be asked a series of questions regarding your investment objectives, risk tolerance, and trading experience. Be honest and accurate. Webull uses this information to determine your eligibility and the level of options trading you're approved for.
Important Note: You typically need to be at least 21 years old to enable options trading on Webull.
Submit and Await Approval: After submitting your application, it will be reviewed. The approval process can range from a few minutes to a few business days. Patience is key here! Webull aims to make this process efficient, but it's a regulatory requirement designed to ensure you understand the risks involved.
Step 2: Researching and Identifying Potential Option Trades
Now that you're approved, the real fun begins! This step is all about finding the right opportunities.
Sub-heading: Utilizing Webull's Research Tools
Webull provides a suite of tools to help you analyze potential option trades.
Stock Screener: Use the stock screener to identify underlying assets that fit your criteria (e.g., market capitalization, industry, recent performance).
Options Chain: Once you've identified a stock, navigate to its detail page and find the "Options" tab. This is where you'll find the options chain, a table listing all available call and put contracts for that particular stock.
Key Information on the Options Chain:
Expiration Dates: Options are time-sensitive. You'll see various expiration dates, typically weekly, monthly, or even longer-dated (LEAPs). Choose a date that aligns with your market outlook.
Strike Prices: These are the predetermined prices at which you can buy (for calls) or sell (for puts) the underlying asset. You'll see a range of strike prices above and below the current stock price.
Premium (Last Price/Bid/Ask): This is the price of the option contract. The "Last" price is the last traded price. "Bid" is the highest price a buyer is willing to pay, and "Ask" is the lowest price a seller is willing to accept.
Open Interest & Volume: These indicators tell you how many contracts are currently open (open interest) and how many have traded today (volume). Higher numbers often indicate more liquidity, making it easier to enter and exit trades.
Greeks (Delta, Gamma, Theta, Vega): These are advanced metrics that help you understand how an option's price is affected by various factors. While not strictly necessary for beginners, they become invaluable as you gain experience. Webull displays these for you.
Sub-heading: Understanding Call and Put Selection
Your market outlook dictates whether you buy calls or puts.
Bullish Outlook (You believe the stock price will go up): Consider buying a call option. You want to choose a strike price that the stock is likely to surpass before the expiration date. A lower strike price typically means a higher premium but a greater chance of the option being "in-the-money."
Bearish Outlook (You believe the stock price will go down): Consider buying a put option. You want to choose a strike price that the stock is likely to fall below before the expiration date. A higher strike price generally means a higher premium but a greater chance of the option being "in-the-money."
Consider the "moneyness" of the option:
In-the-Money (ITM): For a call, strike price is below current stock price. For a put, strike price is above current stock price. These have intrinsic value.
At-the-Money (ATM): Strike price is approximately equal to the current stock price.
Out-of-the-Money (OTM): For a call, strike price is above current stock price. For a put, strike price is below current stock price. These have only time value and are generally riskier but cheaper.
Step 3: Placing Your Options Order
This is where you execute your trading decision!
Sub-heading: Navigating to the Order Entry Screen
Select Your Desired Contract: From the options chain, tap or click on the specific call or put contract (identified by its expiration date and strike price) that you wish to trade. This will take you to the order entry screen.
Sub-heading: Configuring Your Order Parameters
On the order entry screen, you'll need to specify several crucial details:
Action: Buy to Open (since you're initiating a new position).
Order Type:
Limit Order (Recommended for Options): This allows you to set the maximum price you're willing to pay for a call or the minimum price you're willing to receive for a put. This gives you more control and helps avoid unexpected price swings.
Market Order: While available, generally avoid using market orders for options due to potential price slippage, especially for less liquid contracts.
Other Order Types: Webull also supports Stop, Stop Limit, and Stop Loss/Take Profit orders for options, which can be useful for managing risk.
Price: If you selected a limit order, enter the price per contract you're willing to pay. This will be the premium.
Quantity: Specify the number of contracts you want to buy. Remember, one option contract typically represents 100 shares of the underlying stock. So, if you buy 1 contract, you're controlling 100 shares.
Time in Force:
Day: Your order will be active only for the current trading day. If it's not filled by market close, it will be canceled.
GTC (Good-Til-Cancelled): Your order will remain active until it's filled or you manually cancel it (up to 60 days on Webull).
Review and Confirm: Carefully review all the details of your order: the underlying asset, the option type (call/put), expiration date, strike price, premium, quantity, order type, and time in force. Double-check everything before proceeding!
Place Order: Once you're confident, tap/click the "Place Order" button.
Step 4: Monitoring and Managing Your Options Position
Congratulations, you've placed your first options trade! But the journey doesn't end there.
Sub-heading: Tracking Your Position
Access Your Positions: On Webull, navigate to your "Account" or "Positions" tab. You'll see your open options contracts listed.
Monitor Performance: Keep an eye on the current price of your option contract, the underlying stock's movement, and the time remaining until expiration. Webull provides real-time data to help you track your profit/loss.
Understand the Impact of Time Decay (Theta): Options lose value as they approach expiration, even if the underlying stock price doesn't change. This is known as time decay or "theta." This is particularly important for options buyers, as time is working against you.
Sub-heading: Closing Your Options Position
There are typically two ways to close an options position you bought:
Selling to Close (Most Common): If your option has increased in value (or even if you want to cut losses), you can sell it back into the market before expiration.
Go to your "Positions" tab.
Select the option contract you want to close.
Choose "Sell to Close" as the action.
Enter your desired limit price (the price you want to sell it for) and quantity.
Review and place the order.
Exercising the Option (Less Common for Beginners):
Call Option: If you exercise a call option, you are buying 100 shares of the underlying stock at the strike price. You need to have sufficient buying power in your account to cover this purchase.
Put Option: If you exercise a put option, you are selling 100 shares of the underlying stock at the strike price. You need to own 100 shares of the underlying stock to do this, or you will be shorting the stock (which carries significant risk).
Webull may automatically exercise in-the-money options at expiration if you have sufficient funds/shares. However, it's generally recommended for beginners to sell to close options rather than exercise them, as exercising involves taking ownership of shares, which can be a much larger capital commitment. If you wish to exercise early, you typically need to contact Webull's support or find the "Exercise" option within your position details.
Step 5: Leveraging Webull's Advanced Features (Optional but Recommended)
As you become more comfortable, explore Webull's additional features to enhance your options trading.
Sub-heading: Paper Trading for Practice
Practice Risk-Free: Webull offers a robust paper trading (simulator) feature. This is an invaluable tool for beginners! You can practice buying calls and puts with virtual money in a real-time market environment without risking a single penny of your own capital. This allows you to test strategies, get familiar with the platform, and build confidence.
Accessing Paper Trading: You can typically find the paper trading option within the Webull app or desktop platform, often under a "More" or "Menu" section.
Sub-heading: Options Screener and Discovery
Find Opportunities: Webull's options screener allows you to filter options contracts based on various criteria like implied volatility, open interest, volume, and more. This can help you quickly identify potential trading opportunities that align with your strategies.
Options Discover: This feature simplifies the process of finding and placing options trades, making it more intuitive for new users.
Sub-heading: Analyzing Risk and Profit/Loss Diagrams
Visualize Outcomes: Before placing an order, Webull often provides a profit/loss diagram. This visual representation helps you understand the potential profit and loss scenarios for your chosen option strategy based on different underlying stock prices at expiration. Always review this to clearly understand your risk-reward profile.
Important Considerations and Risks
Options trading involves significant risk and is not suitable for all investors. Here are some key points to remember:
Loss of Premium: The most you can lose as an options buyer is the premium you pay for the contract.
Time Decay: As mentioned, options lose value over time.
Volatility: Options prices are highly sensitive to changes in the underlying stock's volatility.
Liquidity: Some options contracts might have low trading volume, making it difficult to enter or exit positions at your desired price.
Regulatory Fees: While Webull often boasts commission-free options trading, regulatory and exchange fees may still apply. Index options might also have a small per-contract fee. Always check Webull's current fee schedule.
Margin Requirements: If you move into more complex options strategies or short options, you may encounter margin requirements.
10 Related FAQ Questions
How to enable options trading on Webull?
You can enable options trading by submitting an application through the Webull app: Menu -> Settings -> Manage Brokerage Account -> Options Trading.
How to get approved for options trading on Webull?
Approval for options trading on Webull requires completing an application that assesses your trading experience, financial situation, and risk tolerance. You typically need to be at least 21 years old.
How to practice options trading on Webull?
Webull offers a "Paper Trading" (simulator) feature where you can practice options trading with virtual money and real-time market data without risking your actual capital.
How to find call and put options on a specific stock on Webull?
Navigate to the stock's detail page, then tap/click on the "Options" tab. This will display the options chain with all available call and put contracts.
How to understand the options chain on Webull?
The options chain on Webull displays crucial information like expiration dates, strike prices, premiums (bid/ask), open interest, volume, and options Greeks.
How to choose the right expiration date for an option on Webull?
Choose an expiration date that aligns with your anticipated timeframe for the underlying stock's price movement. Shorter-dated options are more sensitive to time decay.
How to place a limit order for an option on Webull?
On the order entry screen, select "Limit" as your order type and then manually enter the desired price (premium) per contract.
How to close a call or put option position on Webull?
To close a position you've bought, go to your "Positions," select the contract, and choose "Sell to Close." It's generally recommended over exercising for beginners.
How to know the fees for options trading on Webull?
Webull generally offers commission-free equity options trading, but regulatory and exchange fees may still apply. Index options typically have a small per-contract fee ($0.55). Check Webull's official fee schedule for the most up-to-date information.
How to avoid losses when trading options on Webull?
While you cannot avoid all losses in options trading due to inherent risks, you can manage them by using limit orders, understanding time decay, utilizing stop-loss orders, and thoroughly researching before placing trades. Paper trading is also crucial for risk-free practice.