It's a fantastic idea to understand how to exercise options on Webull, especially if you're venturing into options trading! This guide will break down the process step-by-step, helping you navigate Webull's platform with confidence.
Before we dive in, let's set the stage. Options give you the right, but not the obligation, to buy or sell an underlying asset (like a stock) at a predetermined price (the strike price) before a certain date (the expiration date). Exercising an option means you are choosing to activate this right.
Understanding Your Options: When and Why to Exercise
Not all options are meant to be exercised. Many options traders simply buy to open and then sell to close their contracts, profiting from the change in the option's premium. Exercising an option is typically considered when you want to:
Acquire the underlying shares (for a call option) at a price lower than the current market price, or
Sell the underlying shares (for a put option) at a price higher than the current market price.
Important Note: Webull, like most brokers, will automatically exercise in-the-money (ITM) options at expiration if you don't provide contrary instructions. However, there are scenarios where you might want to exercise an option before expiration, especially for American-style options (which can be exercised anytime before expiry, unlike European-style options which can only be exercised at expiry).
Step 1: Are You Ready to Exercise? Let's Confirm!
Before you even think about tapping that "Exercise" button, let's ensure you're in the right position. Ask yourself:
Do you have a clear understanding of what exercising this specific option means for your portfolio? For a long call option, exercising means you'll be buying 100 shares of the underlying stock per contract at the strike price. For a long put option, it means you'll be selling 100 shares of the underlying stock per contract at the strike price.
Do you have sufficient capital/shares? This is CRUCIAL.
For a long call option exercise, you'll need enough buying power in your Webull account to purchase the 100 shares per contract at the strike price. For example, if you're exercising a call option with a strike price of $50, you'll need $5,000 in buying power for each contract ($50 x 100 shares).
For a long put option exercise, you'll need to hold the underlying 100 shares per contract in your Webull account to sell them at the strike price.
Is the option in-the-money (ITM)? While you can exercise an out-of-the-money (OTM) or at-the-money (ATM) option, it's generally not advisable as it would result in an immediate loss. An ITM call has a strike price below the current market price, and an ITM put has a strike price above the current market price.
Are you aware of the potential fees? While Webull boasts commission-free options trading, there can be regulatory, exchange, and index option fees. Additionally, exercising an option typically incurs an exercise/assignment notice fee, which can vary. Always check Webull's current fee schedule.
If you answered "yes" to these, let's proceed!
Step 2: Navigating to Your Options Position on Webull
This is where the hands-on part begins.
Access the Webull App: Open the Webull application on your mobile device.
Locate Your Account: Tap the Webull logo at the bottom center of the screen. This will take you to your main account overview.
Find "Assets" Tab: Within your account, navigate to the "Assets" tab. This section displays all your current holdings.
Identify Your Options Contract: Under "My Positions" or similar, you'll see your various investments. Look for your desired options contract. Tap on the specific options contract you wish to exercise.
Step 3: Initiating the Exercise Request
Once you've selected the option contract you want to exercise, you're just a few taps away.
Tap "More Actions" (Three Dots): On the detailed view of your options contract, you should see a "More Actions" button, often represented by three vertical dots (or a similar icon) typically found at the bottom right of the screen. Tap this.
Select "Exercise": A menu will pop up with several options. Look for and tap on "Exercise" (or "Early Exercise" if you are doing it before expiration).
Step 4: Confirming Your Exercise Details
This is the final check before submitting your request.
Review the Details Carefully: Webull will present you with a summary of your exercise request. This will include:
The underlying stock
The strike price
The number of contracts you are exercising (and thus the total number of shares)
The total cost if exercising a call (strike price x 100 shares x number of contracts) or the total shares to be sold if exercising a put.
Any applicable fees.
Confirm Sufficient Funds/Shares: Webull will also likely display your current buying power (for calls) or available shares (for puts) to ensure you can complete the exercise. Do not proceed if you do not have the necessary funds or shares.
Submit Your Request: Once you've thoroughly reviewed all the details and are confident, tap "Submit" (or a similar confirmation button). You may be required to enter your trading password for security.
Step 5: What Happens After You Exercise?
The process isn't instantaneous, but here's what to expect:
Processing Time: Your exercise request will be processed by Webull and then sent to the Options Clearing Corporation (OCC). While Webull's in-app exercise feature is designed for single-leg options, complex strategies might require contacting customer service.
Position Update:
If you exercised a long call, your options position will be closed, and you will see the corresponding number of shares of the underlying stock appear in your portfolio at the strike price.
If you exercised a long put, your options position will be closed, and the corresponding number of shares will be removed from your portfolio, with the cash proceeds (strike price x shares) credited to your account.
Settlement: The settlement process for the underlying shares (T+2 for most stocks) will occur after the exercise. This means the shares will officially appear/disappear from your account within two business days.
Early Exercise Considerations: If you exercise an American-style option early, remember that your option premium (time value) will be forfeited. This is often why traders prefer to sell their options rather than exercise them, unless they specifically want to own or sell the underlying shares.
Important Considerations & Best Practices:
Expiration Day Cut-off Times: If you plan to manually exercise an option on its expiration day, be extremely mindful of Webull's cut-off times. These are typically before market close. Options that are ITM by $0.01 or more are usually automatically exercised by the OCC, but it's your responsibility to ensure you have the necessary capital or shares.
"Do Not Exercise" (DNE) Instructions: If you hold an ITM option that you do not wish to exercise at expiration, you must explicitly submit a "Do Not Exercise" (DNE) instruction to Webull. This is also typically done through the app by selecting the option position and looking for a DNE option.
Margin Requirements: Be aware of how exercising an option might impact your margin requirements, especially if you're using margin to trade. Exercising a call option, for instance, means you're buying shares, which can significantly increase your margin utilization.
Dividend Capture: A common reason for early exercise of call options is to capture an upcoming dividend. If the dividend is substantial and the option is deep in-the-money, it might be beneficial to exercise before the ex-dividend date to become a shareholder and receive the dividend.
Consult Webull Support: If you have any doubts or complex scenarios, always reach out to Webull's customer support. It's better to be safe than sorry when dealing with your investments.
10 Related FAQ Questions (How to...)
Here are some quick answers to common questions about exercising options on Webull:
1. How to check if my option is in-the-money (ITM) on Webull? You can see the current price of the underlying asset compared to your option's strike price on the option chain or within your "My Positions" tab. For a call, if the stock price > strike price, it's ITM. For a put, if the stock price < strike price, it's ITM.
2. How to know Webull's cut-off time for exercising options on expiration day? Webull typically has specific cut-off times, often around 4:00 PM ET or 30 minutes after market close on half-days. It's crucial to check Webull's official policy or contact their support for the exact times, as these can vary slightly.
3. How to submit a "Do Not Exercise" (DNE) instruction on Webull? Navigate to your options position in the Webull app, tap on the contract, look for "More Actions" (three dots), and you should find an option to submit a "Do Not Exercise" request. This prevents automatic exercise at expiration.
4. How to understand the fees associated with exercising options on Webull? While Webull offers commission-free options trading, exercising an option usually incurs an exercise/assignment notice fee (e.g., $1 per line item in some regions). Regulatory and exchange fees may also apply. Always review Webull's detailed fee schedule.
5. How to determine if I have enough buying power to exercise a call option? For each call contract, you need enough buying power to cover 100 shares multiplied by the strike price. Webull's platform will usually display your available buying power and warn you if it's insufficient when you attempt to exercise.
6. How to ensure I have the underlying shares to exercise a put option? Before exercising a long put option, make sure you physically hold 100 shares of the underlying stock for each contract in your Webull account. If you don't, exercising the put would result in a short position.
7. How to exercise a complex options strategy on Webull? Webull's in-app exercise feature is primarily for single-leg options. For complex multi-leg strategies (like spreads), you may need to contact Webull's customer service via phone or in-app feedback to submit your exercise instructions.
8. How to deal with an option that is out-of-the-money (OTM) at expiration on Webull? If your option is OTM at expiration, it will expire worthless. You generally don't need to do anything, as it won't be automatically exercised. However, if you mistakenly want to exercise it, you'd need to manually instruct Webull to do so (though this is rarely beneficial).
9. How to know if my option is American-style or European-style on Webull? Most equity options in the U.S. are American-style, meaning they can be exercised any time before expiration. Index options are often European-style, meaning they can only be exercised at expiration. Webull's option chain or contract details should specify the style.
10. How to contact Webull customer service for options exercise inquiries? You can typically contact Webull customer service through the in-app chat feature, by phone, or via email. Look for the "Help Center" or "Customer Service" section within the app for contact details.
