Ready to dive into the exciting world of options trading on Webull? If you've been curious about leveraging options to potentially enhance your portfolio, you're in the right place! This comprehensive guide will walk you through every step of the process, from setting up your account to placing your first options trade. Let's get started!
Step 1: Get Your Webull Account Ready for Options Trading
First things first, let's make sure your Webull account is primed and ready for options. If you don't have a Webull account yet, you'll need to open one and fund it.
Sub-heading 1.1: Opening and Funding Your Webull Account
If you're new to Webull, head over to their website or download the Webull app on your smartphone. The account opening process is generally straightforward:
Provide Personal Information: You'll need to submit details like your name, address, Social Security number (for US residents), and a picture of your driver's license or equivalent ID.
Share Financial Information: Webull will ask about your liquid assets, current income, and employment type. This helps them assess your suitability for different investment products.
Set Up Funding: Once your account is approved, you'll need to deposit funds. Webull offers several methods:
ACH Deposit: This is a common and often free method, though it can take 3-5 business days for funds to fully settle. Webull may offer provisional buying power up to a certain amount while your deposit clears.
Wire Transfer: For faster access to funds, wire transfers are an option, typically taking 1-2 business days for domestic wires and up to 5 for international ones. Be aware of potential wire transfer fees charged by your bank or Webull's bank.
eDDA, FAST, Telegraphic Transfer (TT): Depending on your region, other deposit methods like these might be available. Always ensure the remitter's name matches your Webull account name, as third-party deposits are generally not accepted.
Sub-heading 1.2: Applying for Options Trading Privileges
Even with a funded account, you won't automatically be able to trade options. You need to apply for options trading privileges. This is a crucial step!
Navigate to Settings: In the Webull app, tap "Menu" (bottom right), then "Settings" (below your profile).
Manage Brokerage Account: Tap on "Manage Brokerage Account."
Options Trading: Look for and tap on "Options Trading."
Enter Trading Password: You'll likely need to enter your trading password for security.
Complete the Application: Follow the on-screen prompts, tick the necessary fields, and answer questions about your trading experience, financial situation, and investment objectives. Be honest and accurate—this helps Webull determine your options trading level.
Submit: Tap "Submit" to send your application.
Note: Your application is subject to approval, and you typically need to be at least 21 years old to enable options trading on Webull. The approval process usually doesn't take long, but can vary.
Step 2: Understanding the Basics of Options
Before you jump into placing trades, it's absolutely essential to grasp the fundamental concepts of options. They are complex financial instruments and carry significant risk.
Sub-heading 2.1: What are Options?
An option contract gives the buyer the right, but not the obligation, to buy or sell an underlying asset (like a stock or ETF) at a specified price (the strike price) on or before a certain date (the expiration date). In return for this right, the buyer pays a premium to the seller.
Sub-heading 2.2: Call Options vs. Put Options
Call Options: A call option gives the holder the right to buy a set number of shares (usually 100 shares per contract) at the strike price. Traders typically buy call options when they expect the underlying asset's price to increase.
Put Options: A put option gives the holder the right to sell a set number of shares at the strike price. Traders typically buy put options when they expect the underlying asset's price to decrease. Puts can also be used to hedge against potential losses in a stock you own.
Sub-heading 2.3: Key Terms You Must Know
Underlying Asset: The stock, ETF, or index that the option contract is based on.
Strike Price: The predetermined price at which the underlying asset can be bought or sold if the option is exercised.
Expiration Date: The last day the option contract is valid. After this date, the option expires worthless if not exercised or closed.
Premium: The price paid by the buyer to the seller for an option contract. This is the cost of the option.
In-the-Money (ITM):
For a call option: When the underlying asset's price is above the strike price.
For a put option: When the underlying asset's price is below the strike price.
Out-of-the-Money (OTM):
For a call option: When the underlying asset's price is below the strike price.
For a put option: When the underlying asset's price is above the strike price.
At-the-Money (ATM): When the underlying asset's price is equal to or very close to the strike price.
Moneyness: Refers to the relationship between the underlying asset's price and the option's strike price.
Greeks (Delta, Gamma, Theta, Vega): These are measures of an option's sensitivity to various factors:
Delta: Measures an option's price change relative to a $1 change in the underlying asset's price.
Gamma: Measures the rate of change of an option's delta.
Theta: Measures the rate at which an option's value decays over time (time decay).
Vega: Measures an option's sensitivity to changes in implied volatility.
Step 3: Navigating Webull's Options Interface
Once your options trading privileges are active, it's time to get familiar with Webull's platform.
Sub-heading 3.1: Finding the Options Chain
Search for a Stock: On the Webull app or desktop platform, use the search bar to find the ticker symbol of the stock you're interested in (e.g., AAPL for Apple).
Select "Options": Once you're on the stock's detail page, you'll see various tabs. Tap or click on the "Options" tab.
This will bring up the options chain, which is a table listing all available option contracts for that particular stock.
Sub-heading 3.2: Understanding the Options Chain Layout
The options chain can look a bit overwhelming at first, but it's organized logically:
Expiration Dates: At the top, you'll typically see a list of available expiration dates. Choose the one that aligns with your trading horizon.
Call and Put Sections: The options chain is usually divided into two main sections: calls on one side (often left) and puts on the other (often right).
Strike Prices: In the middle column, you'll see a list of strike prices.
Key Data Points: For each strike and expiration, you'll see data points like:
Last Price: The last traded price (premium) of the option.
Bid/Ask: The current bid (highest price a buyer is willing to pay) and ask (lowest price a seller is willing to accept) for the option. The difference is the spread.
Volume: The number of contracts traded today.
Open Interest: The total number of open contracts that have not yet been closed or expired.
Implied Volatility (IV): A measure of the market's expectation of future price swings in the underlying asset. Higher IV generally means higher option premiums.
Greeks (Delta, Theta, etc.): These important metrics are often displayed or can be toggled on.
Step 4: Choosing Your Options Strategy and Placing an Order
Now for the exciting part – selecting your trade and executing it!
Sub-heading 4.1: Selecting an Option Contract
Determine Your Outlook: Do you believe the stock will go up, down, or stay relatively flat? Your outlook will dictate whether you consider calls or puts, and what strategy you might employ.
Choose Expiration Date: Consider how much time you believe the stock needs to move in your favor. Longer-dated options (LEAPS) generally have higher premiums but less time decay, while short-dated options are more sensitive to time decay.
Select Strike Price:
For Calls: If you're bullish, you might choose an out-of-the-money (OTM) call (strike price above current stock price) for higher leverage but lower probability of profit, or an in-the-money (ITM) call (strike price below current stock price) for higher probability but less leverage.
For Puts: If you're bearish, you might choose an OTM put (strike price below current stock price) or an ITM put (strike price above current stock price).
Understand Option Levels: Webull has different options trading levels, which determine the strategies you can implement.
Level 1: Typically allows for basic strategies like covered calls, buy writes, and cash-secured puts.
Level 2 and higher: Grants access to more complex strategies like spreads, straddles, and naked options (which carry significantly higher risk).
Sub-heading 4.2: Placing Your Order
Once you've identified the option contract you want to trade:
Tap on the Strike Price: In the options chain, tap on the bid or ask price for the specific strike and expiration you're interested in. This will open the order entry screen.
Choose Order Type:
Market Order: Executes immediately at the best available price. Not recommended for options due to potential for price slippage.
Limit Order: Allows you to specify the maximum price you're willing to pay (for buying) or the minimum price you're willing to accept (for selling). This is generally the preferred order type for options.
Stop Order / Stop-Limit Order: Can be used to limit potential losses. A stop order triggers a market order when the option price reaches your stop price. A stop-limit order triggers a limit order.
Trailing Stop: A stop order that adjusts as the price moves in your favor.
Select Quantity: Options are traded in contracts, with one contract typically representing 100 shares of the underlying asset. Specify the number of contracts you wish to trade.
Time-in-Force:
Day: The order is only active for the current trading day.
Good Till Canceled (GTC): The order remains active until it's filled or you cancel it (usually up to 60 days).
Review and Confirm: Carefully review all the details of your order (contract, price, quantity, order type, estimated cost/proceeds) before confirming the trade.
Sub-heading 4.3: Paper Trading Before Live Trading (Highly Recommended!)
Webull offers a fantastic paper trading feature. This allows you to practice trading options with virtual money in a simulated live market environment, without risking any real capital.
Access Paper Trading: You can usually find the paper trading section by looking for a small dollar symbol icon within a square on the left-hand side of your Webull platform.
Practice Strategies: Use the paper trading account to:
Familiarize yourself with the options chain and order entry.
Test different options strategies (e.g., buying calls, selling puts, covered calls).
Understand how price movements, time decay, and implied volatility affect option premiums.
Develop your risk management skills.
Starting with paper trading is a crucial step for beginners to build confidence and understand market dynamics before committing real money.
Step 5: Managing Your Options Positions
Once you've placed a trade, monitoring and managing your positions is key.
Sub-heading 5.1: Monitoring Your Positions
Portfolio Tab: Your open options positions will be displayed in your Webull portfolio or "Positions" tab.
Track Performance: Monitor the profit/loss of your options, as well as the underlying stock's price, implied volatility, and time remaining until expiration.
Set Alerts: Webull allows you to set price alerts for both your underlying stocks and your options contracts, so you're notified of significant movements.
Sub-heading 5.2: Closing Your Options Positions
You generally have a few options for closing an options position:
Selling to Close (for long options): If you bought a call or put, you can sell it back into the market before expiration to realize your profit or loss. This is the most common way to exit a position.
Buying to Close (for short options): If you sold an option (e.g., a covered call), you can buy it back to close out your obligation.
Exercising (for long options): If your option is in-the-money and you want to take ownership of (for calls) or sell (for puts) the underlying shares, you can exercise the option. This is less common for retail traders, as it often ties up more capital. Be aware that in-the-money options may be automatically exercised by the OCC if you hold them until expiration and have sufficient funds/shares.
Letting Expire Worthless: If your long option is out-of-the-money at expiration, it will expire worthless, and you will lose the premium you paid.
Sub-heading 5.3: Risk Management
Options trading involves significant risk, and it's possible to lose your entire investment, or even more with certain advanced strategies.
Define Your Risk Tolerance: Only trade with capital you can afford to lose.
Use Stop-Loss Orders: Consider setting stop-loss orders on your options to limit potential downside.
Position Sizing: Don't allocate too much of your capital to a single options trade.
Understand Max Loss: Before entering any options trade, clearly understand the maximum potential loss.
Educate Yourself Continuously: The more you learn about options strategies, market dynamics, and risk management, the better equipped you'll be.
Step 6: Understanding Webull Options Fees
While Webull is known for its commission-free stock and ETF trading, there are still some fees associated with options.
No Commission on Stock & ETF Options: Webull generally offers no commission on stock and ETF options.
Contract Fees: You'll typically pay a small per-contract fee. For example, Webull charges $0.50 per contract on index options and may charge $0.10 per contract for orders above 500 contracts.
Regulatory Fees & Exchange Fees: These are standard fees charged by regulatory bodies and exchanges, not Webull, and are usually very small per contract.
Exercise/Assignment Fees: If you exercise an option or are assigned shares, there might be a small fee (e.g., $1 per line item).
Always review Webull's detailed fee schedule on their website or app for the most up-to-date information.
Frequently Asked Questions (FAQs) - How to Trade Options on Webull
How to apply for options trading on Webull?
You can apply for options trading by going to "Menu" > "Settings" > "Manage Brokerage Account" > "Options Trading" in the Webull app and following the on-screen prompts.
How to fund my Webull account for options trading?
You can fund your Webull account via ACH deposit (electronic bank transfer), wire transfer, or other regional methods like eDDA or FAST, typically found under the "Transfers" section in the app.
How to find the options chain for a stock on Webull?
After searching for a stock's ticker symbol, navigate to its detail page and tap on the "Options" tab to view the options chain.
How to understand option levels on Webull?
Webull offers different options trading levels (e.g., Level 1, Level 2), which dictate the complexity of strategies you are approved to trade. Level 1 usually covers basic strategies like covered calls and cash-secured puts.
How to place a limit order for options on Webull?
When placing an options order, select "Limit" as the order type, specify your desired price, the number of contracts, and the time-in-force, then review and confirm.
How to use Webull's paper trading for options?
Access the paper trading simulator (often represented by a dollar symbol icon) on Webull to practice options trading with virtual money and zero risk, familiarizing yourself with the platform and strategies.
How to set a stop loss for options on Webull?
When placing an options trade, you can typically select "Stop" or "Stop Limit" as your order type and set the price at which you want your order to be triggered to limit potential losses.
How to close an options position on Webull?
To close a long option, you typically "Sell to Close" the contract. For short options, you "Buy to Close" the contract. This can be done from your "Positions" tab.
How to check options trading fees on Webull?
Webull generally has no commission on stock and ETF options, but small per-contract fees, regulatory fees, and exchange fees may apply. Check their official fee schedule for precise details.
How to exercise an options contract on Webull?
You can generally exercise in-the-money options directly through the Webull app from your positions, or by contacting Webull's support. Be aware of the capital requirements for exercising.
