Webull is one of the groups of brokers who are redefining the investment industry. Founded in 2017, webull offers a cutting-edge, user-friendly, and game-changing internet platform and support for more exotic asset classes such as options.
The futures and options markets are gaining popularity, and it’s no longer just for big investors; smaller investors can also use it to trade.
The Webull online trading platform has features that make it easy for even inexperienced traders to start options trading.
If you’ve been looking for a step-by-step guide on how to buy options on webull, then this piece is for you. In this article, we’ll discuss everything you need to know about Webull options trading and how to buy options on webull.
Before we delve into the procedures on how to trade options on Webull, you must know what options are.
Table of contents
What are Options?
Options are contracts between two parties. These contracts allow the investor to buy or sell a specific asset, such as a bond or stock, at a predetermined price within a specified time frame.
The options contract expires and is considered out of money if the underlying asset fails to reach or cross the strike price within the stated period. According to many investors and trading professionals, options trading is a high-risk enterprise. However, it is highly dependent on the options trading technique you employ.
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What are the Benefits of Trading Options?
Options trading comes with a lot of advantages, and here are a few of the essential ones:
1. Flexibility
Before your Options contract expires, you will have the opportunity to make many strategic moves as an investor or trader, including:
- Boosting your portfolio
- Purchasing the underlying securities
- Exercising the option
- Selling the option
2. High Returns on Investment (ROI)
If the trade goes the direction you predicted, options contracts allow you to earn more money while spending less.
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3. Freeze Stock Prices
Option contracts allow you to lock in a set price for a specific time. Depending on your option type, you can sell or buy the stock before it expires at the strike rate.
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4. Lower Financial Commitment Up Front
The cost of purchasing an option is far lower than owning stock directly. However, if the trade goes in your favor, the reward will be the same as if you bought and sold the stock.
Are There Disadvantages of Options Trading On Webull?
As the popular saying goes, anything with a good side will have a bad side. There are some drawbacks of Options trading on Webull that you should be aware of before embarking on your trading journey.
Below are some dangers of options trading:
1. Expiring Date
Unlike stocks, which you can keep for as long as you like, option contracts have an expiration date. There may be no way to prevent options from expiring because the time value decay rate grows as the expiration dates approach. That’s why keeping an eye on your options is important, so they don’t become worthless.
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2. Full Loss
There is also the possibility of losing every dime you invested in options. It occurs when an out-of-the-money option in your contract hits its expiration date.
Now that you know the advantages and disadvantages of trading options, let’s consider the factors before trading options.
What Are The Factors To Consider Before Trading Options?
Although options might be an amazing way to save money, they can also be a great way to lose money. So, to learn how to trade options on Webull you must be well prepared because it’s not child’s play.
Here are a few things to consider before trading options:
1. Experience Level
It’s crucial to remember that the options market contains a lot of experienced players that prey on the inexperienced. This necessitates an honest assessment of your level of investment experience. It should motivate you to become more aware of the players and improve your skillset, in becoming a successful options trader.
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2. Risk Tolerance
Options have a lot of leverage and can boost your return potential, but they also come with many risks. You must also know how much risk you’re willing to take before you start trading options.
Stock options can be riskier, especially if traded on leverage. Be aware that options trading comes with its own set of risks, and know your risk tolerance.
Types of Options Trading
Options can be classified into several types based on the underlying securities, including stock, index, Forex, commodity, futures, and basket options.
Options are primarily classified into two types, and they are:
- Call options
- Put options
1. Call Options
When you buy a call option you have the right to buy the underlying securities at the strike/specified price. Call Options permit traders to purchase calls if they feel the underlying security price will rise. Additionally, they can sell calls if they feel the price will drop.
2. Put Options
Put options are simply the opposite of a call option. As a put option contract buyer, you have the right to sell the underlying securities at the strike price. The seller is bound to purchase the security if the buyer puts the contract exercises on his or her options.
Purchasing a Put Option grants the option owner the right to sell a stock at a predetermined price within a specified time frame. If the put option is exercised before expiration, the seller must purchase the shares at the strike price.
If an investor believes a stock’s price will fall, he or she can buy a put option, similar to selling a call option. If the stock does fall in value, the put option holder can theoretically sell the stock at the higher strike price and benefit from the stock’s decline.
Now that you’ve known what an option is, the advantages and disadvantages of trading options, and the types of options, let’s look at how you can buy options on Webull.
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How To Buy Options On Webull
Before you make your trading decision, you must assess whether a stock will rise or fall in value between the purchase date and the expiration date.
Below is a step-by-step guide on how to buy options on Webull:
Step 1: Open and Fund Your Account
The first step on how to buy options on Webull is to open and fund your webull account. A mobile or desktop device can be used for this. The entire procedures are all online.
Trading in modest increments can benefit beginner traders since it allows them to practice the skills needed to be successful without risking their entire investment. One of its most appealing features is that Webull has no minimum balance requirement.
Paper Trading accounts, which use virtual funds, are a good option for complete beginners. This is a risk-free approach to learning the fundamentals of trading, and mistakes can be viewed as useful lessons acquired rather than unpleasant losses in real money.
Options trading is typically viewed as more appropriate for more experienced investors and is not recommended for those taking their first steps. Therefore, options trading is a red flag to beginners.
Step 2: Identify the Options Market that You Want to Trade
After signing up, the next step to buy options on Webull is to identify and locate the option you wish to trade. The underlying instrument is frequently mentioned in option names and tickers. If you decide to exercise the option, that will be the instrument you will trade.
If you’re using the Webull mobile app, go to the asset group’s main page for the underlying instrument first. Navigate to the stocks home page if you’re searching to buy Apple stock options. To filter by country or other indicators such as “Analyst Rating,” click the “Options” button at the bottom of the page. You can now choose whatever options market you’d like to participate in.
Step 3: Enter the Trade Quantity
It’s vital to know that “Puts” and “Calls” function in opposite directions but may have the same strike price while determining how to buy options on Webull. On the Nasdaq index, for example, you could discover “Puts” and “Calls,” both with a Strike price of 14,350. It’s as simple as clicking “Buy” after inputting the number of options you want to trade.
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Step 4: Place an Order
In figuring out how to buy options on webull, after completing the necessary processes and confirming the option you wish to purchase, you’ll need to place an order. Before submitting your order, double-check all of your inputs. You can also go to the graph part of the “Order Entry” tab, which is located at the left-bottom.
In the graph, the profit and loss zones are usually defined. You’ll see a green hexagon and by sliding the green hexagon, you may alter the striking price.
FAQs On How To Buy Options on Webull
You can start purchasing options after filing a trading request and having it accepted by Webull. Only during regular business hours is it possible to trade options before the expiration date (9:30 a.m. to 4 p.m. EDT, with some exceptions that can be traded until 4:15 p.m.).
The following are some of the advantages of trading options on a Webull account:
No commissions
No contract fees
No payments for assignments or exercises
Technical indicators and advanced charting
Cross-platform smartphone and desktop apps that are easy to use
Webull doesn’t charge a commission for trading options. Webull only charges $0.14 for option contracts.
Webull is one of the best options trading platforms for low-cost options trading. It offers tons of educational resources for traders new to the industry.
Webull also offers commission-free options and stock trading, whether you’ve never traded options or are a seasoned pro. So, Webull is good for trading options.
The prices on the Webull platform are taken immediately from the markets. If the stock markets in the United States are open, the prices displayed on the Webull platform are current. Some markets close overnight, while most (except crypto) close throughout the weekend. Webull uses delayed price feeds in certain of its marketplaces.
Final Thoughts
Options trading is very volatile and may not be suitable for all investors. While it’s flexible, Option investors risk losing their entire investment in a twinkle of an eye, resulting in a permanent loss by the expiration date.
It takes a lot of dedication to learning and practice to become a successful options trader. Spending time on education, strategy creation, and understanding the variables that drive the stock options market will pay off in the long run.
With that being said, options trading provides investors more flexibility than traditional equities investing when it comes to constructing a winning strategy. The options trader must be confident in their idea, understand why they are initiating a trade.
References
- benzinga.com – How To Trade Options On Webull
- webull.com – How to Trade Options – Beginners Guide To Getting Started
- tradersunion.com – Webull Options – Everything You Need to Know About Webull Option Trading to Earn More
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