A step-by-step guide on how to trade (Put and Call) Options on Webull!
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Now it is time to trade options on webull, unfortunately webull does not allow options trading on paper accounts, which to be honest sucks as you can not practice a more complicated trading process than buying and selling stock. Many people are struggling with understanding what it means to trade options and then how to trade them in general.
For those not familiar a A call option gives the holder the right, but not the obligation, to buy the underlying security at the strike price on or before expiration. A call option will therefore become more valuable as the underlying security rises in price.
On the other hand a put gives the holder the right, but not the obligation, to sell the underlying stock at the strike price on or before expiration. A long put, therefore, is a short position in the underlying security, since the put gains value as the underlying price falls
For trading options I have created a different board, remember you can create as many as you want and you can switch from the tabs above, I named this one “options”.
I will use Twitter stock for this type of order.
So to begin I would like to place a put order on twitter.
To do that first I need to have twitter on my watchlist, so I will search and add it there.
PErfect now I have twitter on my board and I will buy some put options as I believe that it will decline in price.
First I start by picking the expiration date, and since I personally believe that twitter will decline over time I will pick an expiration date which gives me some space. That date from me is January 20 of 2023.
The current price of Twitter today is 50.58 cents and is rising by 0.49%.
On the board you only see 10 available prices, but I want to expand that and get more entry prices, click where it says strike and pick what you prefer, I think 40 is a good number.
The strike price is a fixed price at which you can buy or sell the option, in case of a call or put. I will scroll down and find a price that I want for my put, a price that makes sense to me.
For me that price is 50$, which means that if I buy a put with a strike price of 50$, I expect that between now and January 23 of 2023 the price of twitter will be lower than 50. That will give me the right to buy 100 shares of Twitter at the price that the stock will be trading at that moment,(hopefully way bello 50) and sell it for 50$ a piece. If twitter for example goes to 40$ I can buy 100 shares and pay 4000$ because I can sell them right away for 50$ and make a profit of 1000$ or 25%.
If the price doesn’t go my way well I will lose, but I will try to get rid of my options at a lower price to offset some of the losses.
Anyway, to proceed, think of it as trading stocks. You have the bid price which is 2.91$ .
Keep in mind that when buying this will be multiplied by 100 so the actual cost will be 291$ or you can buy market at the ask price of 3.10$ or $310. I will set a bid option but I will increase the price a bit.
I will set a limit order and wait. On the pop up I get the max loss which is 295$ , the cost of buying the option, the break even price which is 47.05$ as this is the difference between he price I pay and the price I have the right to sale, and the max profit I can get is $47 Thousand if price crashes to 0. That will not happen, but I can see twitter going to 40$ over that time. I may be wrong, time will tell. The order was placed.
As you can see the buy symbol was added next to the 50$ put. The last price that the 50$ put with expiration January 20 of 2023 executed was placed was at $3.05, my price is at 2.95.
This could take quite the time to complete.
But this gives a good opportunity to check how to cancel an option order. Head to the order box which in my case is below the trading box, and on the three dots that appear prio the symbol click and choose cancel.
Let’s get back and trade one more tile. This time I will set a put option with a strike price of 52.5. Once more I will do limit order, set a price at 3.25 which is above the bid price so I am first on the line to get filled and wait.
Perfect, my order was filled .
Now I can see my position below. It cost me 325$ to buy the options, currently it costs 332.50$ if I want to sell it. But I stand by my prediction that the price of twitter stock will decline between now and January quite a lot, so all I will do moving forward is waiting.
To close your option on webull is quite easy as well, head to your position, right click on the symbol and you can pick “close order”. On the pop up window you can set a limit, market, stop or stop limit order and once ready you can click place order. If I was to sell for 3.50 I could make 25$ if the order was to get filled.
I like my position thus I will not sell yet.
The same way you can set a put option you can set a call option. If I believed that Twitter price would increase over time I would set a call option with a strike price of 51$. That would have given me the right to purchase 100 shares of twitter for 51$ and sell them at the price that the stock would be trading later. If for example it was reaching 70$ in December I would be able to buy 100 shares for 5100 and sell them for 7000$ making a profit of 1900.
Keep in mind the majority of options traders do not plan to buy the actual shares, they just trade the options and sell them before they expire.
Today I bought 1 option for 3.15$ . If the price goes to 5-6$ I may sell it and book profits, if it goes the other way and the date is approaching , instead of losing the entire amount I will try to salvage what I can.
Trading options allow you to trade a minimum of a 100 shares for a fractional price. In my example I paid 325$ to buy one option which is equal to 1000 shares. For every dollar the price of Twitter stock declines, essentially I make 100$ if I am to execute the option and buy the shares.
Anyhow, Trading options is not for everyone, but if you understand how to trade it, which is quite easy to be honest, and most importantly if you understand what it means to trade options, the risks and the possible loss or profit, then by all means it is totally worth it!
Overall I think Webull broker is a very solid broker , with an excellent phone as well as a good web and desktop application. You will need to spend some time to customize it on your standard, but once you do you will be able to use it for all your trading.
Also Watch: Webull: How To Buy And Sell Stocks and Webull: How To Open And Fund An Account
