Buying options can give the holder the right to buy or sell an instrument. The ‘call’ option displays the right to buy at a certain price, and the ‘put’ option is the right to sell.
Although you are buying an option, this could be because you think that the value might fall.
Follow the below steps in order to open and fund an account.
1. Open An Account
This can be done using either a desktop or a mobile device. The process can be done online and it only takes a few minutes to complete.
One good feature of Webull is that you don’t have to have a certain amount of money to start it off. You can start it off using paper trading (see also ‘How To Paper Trade On Webull‘) and, that way, you won’t lose any money.
If you are a complete new starter when it comes to investing, you can use the paper trading option.
This uses virtual funds and works as a risk-free option to start to understand the basics of trading and the ways that you should work in order to make money or not lose money.
When you start trading with this, you can learn in a risk-free way what works and what doesn’t work without losing any money.
However, when you are using paper trading (see also ‘What Is Paper Trading On Webull?‘), you can’t use the option trading category so you have to be using a live account. It is quite a complex thing and it is mostly used for those who are more experienced in trading.
Options trading isn’t right for everyone and you should make sure that you don’t lose the entire value of the investment in a short period of time.
2. Locate The Option Market
After creating your account and setting it up, you should then locate the option that you want to trade. This is the instrument that you are hoping to trade if you choose to exercise the option.
On the Webull mobile app, you should first go to the homepage of the underlying instrument. For instance, if you are hoping to buy stocks in Amazon, you should head to the amazon home page.
You should then click on the ‘options’ button that you will see at the bottom of the page in order to select the options market that you are choosing to trade in.
3. Enter The Quantity
Next, you should enter the quantity that you want to trade. When you’re working out how to buy options on Webull, you should make sure that you remember that ‘puts’ and ‘calls’ work in the opposite direction.
Once you have entered the number of options that you want to trade, then you can start by clicking ‘buy’.
What Are The Risks That Come With Options Trading
Options have a bad reputation in certain circles. These risks include that they are often seen as being high risk-return. This largely came about because investors are looking for a way to manage risk.
Using options in order to manage risk is a big risk. For instance, a long-only equity investor. Data implies that in the long run, in a long-only equity investor, the equity positions should increase in value.
This causes a risk of the value of the stock because it could be hit by a short-term market correction.
For instance, as COVID shows, there have been drops of up to 20%. One approach to managing that risk is the ‘put’ options.
This is to buy out-of-the-money options that allow the person who holds the stocks to make a profit at lower levels than the market prices.
In the event of the market crashing, the long equity position losses are limited because of the increased value that comes from the put options.
Using Options To Influence Trading
At Webull, every stock that you can opt for is the equivalent of 100 shares. This means that when you buy using options, you will gain much more exposure to the market using less funds.
Using options also frees up cash for other positions so your money can go a lot further.
Option Price Moves
Options trading is the way that the price moves. If you have options that allow you to buy certain stock, but the stock is lower than expected, then a move in the price won’t affect the price of options much (see also ‘What Is Theta In Options?‘).
You will need to wait until the price gains have happened before you can access them.
For instance, if you had an option that gave you the chance to buy a stock at $100, but the current price of that stock was $90, then that price moving to $91 won’t affect the price of the options too much.
You will need the extra $9 in order to see this price option come into use.
Can You Sell Options?
You can sell options, however, this is one of the riskiest forms of options trading. It is different from buying a ‘put’ option.
The advantage of selling options is that the seller will receive a big income. However, there is an obligation on the seller which means that they have to deliver the underlying asset.
Retain traders who buy options only risk the premium that they need to make the first purchase so the worst-case scenario is that the options become worthless. This is if they don’t exercise the at-the-money options.
Are Webull Charts In Real-Time?
Webull takes their prices for their stocks directly from other markets. If the US markets are open at the time that you are looking at the charts, then they are live.
Often, the stock markets close overnight and over the weekend. If you are looking then they may not be live. Crypto doesn’t usually close at all.
So, now you have more of an understanding of how to buy options on Webull (see also ‘How To Turn Off Share Lending Webull’). Webull (see also ‘How Long Do Webull Deposits Take?‘) is a complicated app that has many different features and so it is very important to understand how to use it to make the most of it.