Hello there! Are you ready to dive into the exciting world of options trading on Webull? Specifically, are you looking to understand how to place a put option? You've come to the right place! This comprehensive guide will walk you through every step, from account setup to executing your first put trade. Let's get started!
Understanding Put Options: A Quick Overview
Before we jump into the "how-to," let's briefly touch upon what a put option is. A put option gives the buyer the right, but not the obligation, to sell an underlying asset (like a stock) at a specified price (the strike price) on or before a certain date (the expiration date).
Why would you buy a put option? Typically, you do so when you anticipate that the price of the underlying asset will decrease. If the stock price falls below your strike price, your put option becomes profitable. It's a way to potentially profit from a downward movement in a stock, or to hedge against losses in a stock you already own.
Keep in mind that options trading involves significant risks and is not suitable for all investors. You can lose your entire investment quickly.
How to Place a Put Option on Webull: A Step-by-Step Guide
Step 1: Get Approved for Options Trading on Webull
This is the very first and most crucial step. Webull, like all regulated brokers, requires you to apply and be approved for options trading. This isn't just a formality; it ensures you understand the inherent risks.
Sub-heading 1.1: Meeting the Requirements
Open and Fund Your Webull Account: If you don't already have one, you'll need to open a Webull brokerage account. This involves providing personal and financial information. There's no minimum deposit required to open an account, but you'll need funds to trade.
Age Requirement: Generally, you must be at least 21 years old to enable options trading on Webull.
Margin Account (Often Recommended): While not strictly required for all put strategies (like buying a put), having a margin account often broadens the options strategies you can employ, particularly if you plan on selling puts or engaging in more complex strategies. Short selling, for instance, requires a margin account.
Financial Knowledge Assessment: Webull will ask you a series of questions to gauge your understanding of options trading. This "ETO Assessment" (Educational Trading Objective) is designed to ensure you comprehend the complexities and risks involved. You typically get a few attempts if you don't pass on the first try.
Sub-heading 1.2: The Application Process
Open the Webull App: Log in to your Webull account.
Navigate to Settings:
Tap "Menu" (usually at the bottom right).
Tap "Settings" (often found under your profile).
Tap "Manage Brokerage Account."
Find Options Trading: Tap on "Options Trading."
Enter Trading Password: You'll likely need to enter your trading password for security.
Enable Options Trading: Toggle or select the option to enable options trading.
Complete Assessment & Agreements: You will be prompted to complete the ETO Assessment and agree to various disclosures, including the "Characteristics and Risks of Standardized Options." Read these carefully!
Submit Application: Tap "Submit."
Your application will then be reviewed, and approval is subject to Webull's discretion. This can take a few hours to a few business days.
Step 2: Researching and Selecting the Underlying Stock
Once approved, you're ready to start looking for opportunities.
Sub-heading 2.1: Identifying Potential Candidates
Bearish Outlook: Remember, put options profit when the underlying stock price goes down. So, you need to identify stocks that you believe are likely to decline in value. This could be due to:
Upcoming earnings reports that you expect to be poor.
Negative news related to the company or its industry.
Technical analysis indicating a downward trend.
Market-wide concerns that might affect specific sectors or the broader market.
Liquidity: For options, liquidity is key. Look for stocks with high trading volume in their options contracts. This ensures you can easily enter and exit your positions without significant price slippage.
Sub-heading 2.2: Navigating to the Options Chain
Search for the Stock: In the Webull app (or desktop platform), use the search bar to find the ticker symbol of the stock you're interested in (e.g., TSLA, AAPL, AMZN).
Go to the Options Tab: Once on the stock's detail page, you'll see various tabs like "Quotes," "News," "Analysis," etc. Tap or click on the "Options" tab.
This will bring up the options chain, a table displaying all the available call and put contracts for that particular stock.
Step 3: Choosing the Right Put Option Contract
The options chain might look overwhelming at first, but let's break it down for selecting a put.
Sub-heading 3.1: Understanding the Options Chain Elements
Expiration Date: This is the date the option contract expires. You'll see a list of dates (weekly, monthly, quarterly). Choose an expiration date that aligns with your market outlook. If you expect a quick drop, a closer expiration might be suitable, but these decay faster due to time value. Longer expirations give the stock more time to move but are also more expensive.
Strike Price: This is the price at which you have the right to sell the underlying stock.
In-the-Money (ITM): For a put, ITM means the strike price is above the current stock price. These are more expensive but have intrinsic value.
At-the-Money (ATM): The strike price is equal to or very close to the current stock price.
Out-of-the-Money (OTM): For a put, OTM means the strike price is below the current stock price. These are cheaper but only have extrinsic value (time value) and require a larger downward move to become profitable.
Bid and Ask Prices:
Bid: The highest price a buyer is willing to pay for the option.
Ask: The lowest price a seller is willing to accept for the option.
The difference between the bid and ask (the spread) can indicate liquidity. Tighter spreads are generally better for traders.
Last Price: The price at which the option last traded.
Open Interest: The total number of outstanding option contracts that have not yet been closed or exercised. Higher open interest often indicates more liquidity.
Volume: The number of contracts traded during the current day. High volume is a good sign for liquidity.
Sub-heading 3.2: Selecting Your Put Contract
Filter for Puts: On the options chain screen, make sure you have "Puts" selected (or "Both" if you want to see calls as well).
Select Expiration Date: Tap on the desired expiration date from the list.
Choose Strike Price: Scroll through the list of strike prices for your chosen expiration. Consider your risk tolerance and profit potential:
Closer to the money (ATM or slightly ITM) puts are more expensive but require less movement for profit.
Further out of the money (OTM) puts are cheaper but are riskier as they require a larger price drop to become profitable.
Review Option Details: Once you tap on a specific put contract, you'll see a detailed quote with the bid, ask, last price, volume, open interest, implied volatility, and Greeks (Delta, Gamma, Theta, Vega, Rho). Pay attention to the bid and ask spread.
Step 4: Placing Your Put Option Order
You've picked your contract! Now it's time to place the trade.
Sub-heading 4.1: Entering Order Details
Tap "Trade" or "Buy": After selecting your desired put contract, you'll typically see a "Trade" or "Buy" button. Tap it.
Select "Buy to Open": Since you're initiating a new put position (you don't own it yet), you will select "Buy to Open."
Order Type:
Limit Order (Recommended): This allows you to specify the maximum price you're willing to pay for the option. It's generally preferred for options to avoid buying at an unfavorable price, especially with wide bid-ask spreads.
Market Order (Use with Caution): This executes your order immediately at the best available price. While fast, you might get filled at a price higher than you expected, especially for less liquid options.
Other order types like stop-limit are also available but are more advanced.
Price (for Limit Order): If you selected a limit order, enter the price you want to pay per contract (this is the premium). You might start with a price between the bid and ask.
Quantity (Contracts): Options trade in contracts, and each standard contract typically represents 100 shares of the underlying stock. Enter the number of contracts you wish to buy. Remember that the total cost will be (price per contract) x (number of contracts) x 100.
Time-in-Force:
Day: The order will be active only for the current trading day. If not filled, it expires at the end of the day.
GTC (Good-Til-Cancelled): The order remains active until it's filled or you manually cancel it (typically up to 60 days).
Sub-heading 4.2: Review and Confirm
Review Your Order: Before confirming, double-check all the details:
Asset: Is it the correct stock?
Option Type: Is it a Put?
Action: Is it "Buy to Open"?
Expiration Date: Is it the right date?
Strike Price: Is it the intended strike price?
Order Type: Is it Limit or Market?
Price: Is the price correct (for limit orders)?
Quantity: Is the number of contracts correct?
Estimated Cost: Understand the total premium you will pay.
Confirm: If everything looks correct, tap or click "Confirm" or "Place Order."
Step 5: Monitoring Your Put Option and Managing the Trade
Placing the order is just the beginning! Effective trade management is crucial.
Sub-heading 5.1: Tracking Your Position
Portfolio Section: Your purchased put option will appear in your Webull portfolio under the "Options" section. Here you can see your unrealized P/L (profit/loss), current value, and other relevant metrics.
Price Movements: Monitor the price of the underlying stock closely. If it moves in your favor (down), your put option's value should increase.
Time Decay (Theta): Remember that options lose value as they get closer to expiration due to time decay. This is especially true for out-of-the-money options.
Implied Volatility: Changes in implied volatility can also significantly impact option prices. An increase in implied volatility generally benefits put option buyers.
Sub-heading 5.2: Deciding When to Close or Exercise
Selling to Close: Most options traders close their positions by selling the option back before expiration rather than exercising it. This allows them to profit from the increase in the option's value without having to deal with selling the underlying shares.
If you decide to sell, navigate to your portfolio, tap on the put option, and select "Sell to Close." You'll then enter your desired sell price (for a limit order) and quantity.
Exercising the Option: If your put option is in-the-money at expiration (i.e., the stock price is below your strike price), you have the right to exercise it. This means you would sell 100 shares of the underlying stock per contract at the strike price.
Important Note: If you don't own the underlying shares, exercising a put option will result in a short position in the stock. This comes with unlimited risk and requires a margin account. Webull may automatically exercise in-the-money options at expiration if you have sufficient funds or shares.
Letting Expire Worthless: If the stock price is above your strike price at expiration (out-of-the-money), the put option will expire worthless, and you will lose the entire premium you paid.
Webull Options Trading Fees
Webull generally advertises $0 commission for US stock and ETF options trades. However, it's crucial to be aware of other potential fees:
Regulatory Fees: Small fees imposed by regulatory bodies like the SEC and FINRA.
Exchange Fees: Fees charged by the options exchanges.
Option Contract Fees: While many US stock/ETF options are commission-free per contract, some exceptions apply. For instance, index options (like SPX, VIX) might have a fee per contract (e.g., $0.50 per contract on index options).
Exercise/Assignment Fees: If you exercise an option or are assigned (for option sellers), there might be a small fee per line item.
Always check Webull's most up-to-date fee schedule for precise details, as these can change.
10 Related FAQ Questions
How to get approved for options trading on Webull?
You must submit an application through the Webull app, typically by navigating to Menu > Settings > Manage Brokerage Account > Options Trading. You'll need to complete a knowledge assessment and agree to disclosures.
How to find put options on Webull?
After selecting a stock, go to its "Options" tab. You'll see a list of expiration dates and strike prices. Ensure "Puts" is selected to view put contracts.
How to understand the strike price when buying a put on Webull?
The strike price is the price at which you can sell the underlying stock. For a put to be profitable, the stock's market price needs to fall below your chosen strike price.
How to choose the right expiration date for a put option on Webull?
Select an expiration date that aligns with your anticipated timeframe for the stock's price decline. Shorter-term options are cheaper but decay faster, while longer-term options are more expensive but give the stock more time to move.
How to interpret bid and ask prices for a put option on Webull?
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 (spread) indicates liquidity; a tighter spread is generally better.
How to place a limit order for a put option on Webull?
When placing your trade, select "Limit" as the order type. Then, input the specific price you are willing to pay for each option contract.
How to determine the total cost of buying a put option on Webull?
The total cost is calculated by multiplying the premium (price per contract) by the number of contracts you wish to buy, and then by 100 (since one options contract represents 100 shares).
How to close a put option position on Webull?
To close a long put position (one you bought), you will "Sell to Close" the option. Navigate to your portfolio, select the option, and choose this action.
How to exercise a put option on Webull?
If your put option is in-the-money at expiration and you wish to exercise it, you have the right to sell the underlying shares at the strike price. If you don't own the shares, this will create a short position. Webull may automatically exercise in-the-money options at expiry.
How to avoid losing money on put options on Webull?
There's no guaranteed way to avoid losses, as options are inherently risky. However, you can manage risk by using limit orders, starting with smaller positions, thoroughly researching the underlying stock, and understanding time decay and implied volatility. Never invest more than you can afford to lose.
