Commission-Free Options Trading - Investing with Webull

If you've been trading stocks and ETFs for a while and feel ready to move onto more advanced strategies, you may look to add options to your trading toolkit.

Options give traders the opportunity to buy or sell securities at a predetermined price sometime in the future. For example, if you think the price of a stock is going to increase in the near future, you might buy a call option which allows you to purchase the stock at today's price, weeks later. If you're right and the stock price rises, you can exercise your option to buy the stock at a lower-than-market price The risk comes from never knowing how a stock price will move. If the price plummets when you thought it would increase, that same option is worthless, because it would be cheaper to buy the stock on the current market.

If you're interested in adding options to your investment portfolio, keep reading this lesson, which will teach you the basics of placing options trades on Webull.

Where to Find Commission-Free* Options

In the past, brokers charged a commission for processing options trades, just as they did for stock or ETF trades. However, as the digital era has simplified the trading process, fees have become less common.

Some brokerages still charge regular commissions, but Webull provides 100% commission-free trading on stocks, ETFs, and equity options (certain index options carry per-contract fees*). This extends to all Webull platforms, so it doesn't matter whether you place your trade on the mobile app, from the desktop platform, or on the web browser.

How to Trade Options Commission-Free

As with any investment, remember to strategize with your risk tolerance in mind. Don't take risks that are outside of your comfort zone or could compromise your financial situation. When you're ready to place an options trade, follow these steps.

Add Options to Your Account

Whether you're in a cash account, a margin account, or an IRA, there's an extra application process for trading options after opening your account. The approval process typically takes 1-2 business days, although many applications are approved faster. Remember to answer all application questions in full honesty. Webull is obligated to ensure that our clients are trading products that are suitable for them.

Research a Security

Once your account is ready to trade options, you can flex your research skills. Options trading requires investors to take market timing and price movement into consideration much more carefully than long-term stock investors. So, you should be well-versed in the securities you're looking to buy options for. When an investor buys an index fund and plans to hold it for decades, timing doesn't matter as much because one can assume that over decades the value of that security will rise, regardless of how it performs in the weeks or months after it's purchased.

Options, on the other hand, have a specific expiration date. Profiting from options trades requires you to predict how the price of the underlying asset will move in that timeframe.

Access Options on Webull

Options trading isn't quite as simple as picking whether you think a stock will go up or down. Now that you've done the research and decided where you think the stock is going, it's time to see what options you can buy and what prices they're trading at.

Search for an asset on whichever interface you prefer (app, desktop, or browser). The layout will vary slightly, but the overall process remains the same. Once you're on the details page for your stock of choice, find the "options" tab. On a smartphone or tablet, you can simply tap on options to open up the options page. On a desktop browser, click on the "show" symbol to the right of "options."

Choose a Strike Price and Expiration Date

One of the key aspects of an option is its strike price. This is the price you're locking in to buy or sell the underlying at. For a put option, the strike price is the price at which you can sell the stock. For a call option, the strike price is the price at which you can buy the stock.

When you first open up the options page on Webull, the strike price will be displayed in the middle. Call details will be on the left and put details will be on the right. When using the mobile app, you can toggle between viewing calls and puts individually or simultaneously. As the strike price changes, so too does the price of the option. Just like stocks, option prices are displayed in terms of asks and bids, and these prices will fluctuate throughout the trading day.

Along the top of the options page, you'll see a series of dates. These are the expiration dates you can choose. When you choose an expiration date, you're essentially choosing the timeframe for your options bet—you think you'll be in the money on the expiration date. The date farthest to the right of the screen will have an arrow that opens a drop-down menu, and this menu allows you to select even later dates to trade on longer timelines.

Place an Order

Unlike stock trading, options positions on Webull can only be opened by a limit order. A limit order ensures that you won't pay more than your set price, but it executes much slower. If you set your price target too ambitiously, it may not even execute at all.

Be sure to double check the details of your order before submitting it. Ensure that both the price and quantity reflect your desired order. A simple typo at this stage could end up costing you a lot of money, so it pays to go slow and check your work.

Also, keep in mind that standard options are for 100 shares of the underlying security. The price of the option will be multiplied by 100 as you place your order. If you see a price of $0.05, that option will actually cost $5. Similarly, if a put allows you to buy a stock at $10, exercising that option will actually cost $1,000 (but you will get 100 shares of the stock).

Choose Whether to Auto-Exercise or Not

Webull offers an auto-exercise option, which can be turned on or off for each individual long position. once you've completed your order and the option is moved to your positions, you can find the auto-exercise toggle by opening up the details of your position. . Toward the bottom of the screen, you'll see "Do not Auto-Exercise at Expiration."

Turn this feature on if you think you might want to let your option expire without being exercised. This might sound like a bad thing, but depending on where the stock has moved since you bought the option, you could save money by doing nothing. If your option is in the money by a single penny, it is eligible to be exercised, but in order for you to profit, it must be in the money by an amount greater than the premium you paid for it.

If you're confident you'll want to exercise your option, leave this feature off. If the option is a call, keep enough cash in your account to execute the transaction (the strike price x 100). If you don't have enough overnight buying power to exercise a call option, Webull will liquidate the option. If the option is a put, acquire the necessary amount of underlying shares (usually 100) before the day the option expires.

Watch the Underlying Security

Once your order is complete, the option will be added to your positions, and the order will move from "working orders" to "filled orders." Keep an eye on the underlying security and use that price movement to time your next move. You can either sell the option, exercise the option, or let it expire.

Like other assets, the price of an option fluctuates throughout the day. If the value of your option rises significantly, you might choose to sell the option, rather than exercise it. The transaction process is the same as selling a stock: select the option in your positions page and place a sell order.

If you're in the money and you plan on exercising the option, ensure your account is prepared to handle the trade. For a put option, this means holding 100 shares of the underlying security to sell. For a call option, this means keeping enough cash in your account to buy 100 shares at the strike price. Investors with a margin account have some flexibility with put options as long as the account's maintenance requirements can support the transactions.

Stay Plugged into the Market

Options trading is for experienced investors who pay close attention to the markets. Stay on top of your positions while trading options. Tuning out stock market news for a few days may be okay for a casual investor, but any day in the option market could present a chance to exercise your long position, or the chance that you'll be assigned on your short position. There is no one-step, buy-and-hold, "set it and forget it" strategy in options trading. Executing an options trade correctly requires you to remain engaged and ready to take action.

Keep researching, read the news, and watch your positions—you may find that options trading is a lucrative tool for your investment portfolio.

Disclaimer: Options trading entails significant risk and is not appropriate for all investors. Option investors can rapidly lose the value of their investment in a short period of time and incur permanent loss by expiration date. Losses can potentially exceed the initial required deposit. Before trading options please read the Options Disclosure Document "Characteristics and Risks of Standardized Options" which can be obtained at www.webull.com. Index Option contract fee, Regulatory and Exchange Fees may apply.