Whether you are a trader or an investor, your goal is to make money.
Your secondary goal is to accomplish this with minimal risk.
Most people know that they key to making money is buying low and selling high.
One of the tricks of experienced stock traders is to not buy stock.
Instead, experienced traders will buy options.
Everyone likes to have options, right?
In investing, options have certain characteristics that cannot be found elsewhere in the investing universe.
Here are FOUR reasons why you should be trading options:
Options allow you to get the most out of both sides of the market.
If you think a stock is going up, you can buy a call option.
If you think a stock is going down, you can buy a put option.
If you buy both, you can capitalize on the market regardless of its condition.
The ONLY potential loss you will take is on the price of the option.
With leverage, you can invest more money.
Each options contract is worth 100 shares of the underlying security.
Therefore, you can control more investments with less money.
If the option does not reach your desired price, you only lose the option price.
You can hedge your investment to lower risk.
Put options are great for hedging your portfolio or individual position.
In doing so, your hedge will protect your underlying stock for a given time period.
4. Income Generation
One of the most popular uses of options is to MAKE MONEY.
We call this “income generation” on Wall Street.
Let’s say you have 100 shares of XYZ stock.
You believe this stock is going to remain the same.
In this scenario, you can sell calls against your position to general income from options premiums.
As you can see, options can set you up to profit regardless of what the market does.
By increasing your opportunity to profit, you can decrease your risk at the same time.
Webull hit the market in 2018 and has been killin’ it ever since.
All you need is a smart phone (compatible with iOS and Android) and an account.
If you don’t have a smart phone, you may be out of luck.
Similar to our friends over at Robinhood…
…Webull offers free trades and no account minimum.
You can make unlimited free trades of stocks and ETFs.
However, Webull departs from Robinhood in many ways.
Previously, we told you that Webull offers free advanced trading tools.
These tools are far superior to anything that Robinhood provides to-date.
With Webull, you gain access to:
- Up-to-date news to keep you current on the latest events.
- Real-time market data to give you the most accurate information for decision-making.
- Analysis tools to allow to make the best possible decision.
However, if you are a loyal reader, you likely know all of this information!
If you are new here, we would like to say WELCOME…
…oh, and Webull is LEGIT!
Webull was lacking something the last time we looked into the company.
What was that one thing?
You could not trade options.
If you are ready this today, the above statement is no longer true.
You can now trade options with Webull.
But if you are new to stock trading, perhaps you have no clue what options can do for you.
So, let’s cut the chit-chat and get down to business.
In this article, you will learn:
- What are options?
- Why trade options?
- What are the advantages and disadvantages of trading options?
- Why you should you trade options with Webull?
By the end of it all, you will know what options are, how to trade options, and where to trade options.
What Are Options?
Options give you the right to buy (call option) or sell (put option) an asset at a pre-set price before your contract expires.
Why did I emphasize the word “right?”
Because you have the right, but are not obligated, to make such a transaction.
So, why would you want to trade options, anyway?
Options are powerful tools that can enhance your portfolio.
How is this possible?
Options enhance your portfolio by adding income and protection.
Here are the essentials of options trading:
- Call Option. Allows you to buy shares of stock at a specific time.
- Put Option. Allows you to sell shares at a specific time.
Examples of Options
Rather than simply explaining options…
…let’s put our understanding to the test.
Let’s say that Microsoft shares are trading at $100 per share.
You believe that Microsoft is going to skyrocket in value.
Therefore, you purchase a call option to profit from the anticipated price increase.
You purchase one call option with a strike price of $125 for one month in the future.
Each contract costs .30 cents (.30 x 100 = $30).
If the stock goes up to $126, your option will be worth $1 per contract.
In this case, you could exercise the option to buy for $125 per share and resell for $126 per share.
The profit on this option would be 170% since you paid .30 cents per share and earned $1.
That profit margin is significantly greater than if you had purchased the stock outright (and received a 20% gain).
So, options are great, right?
Not so fast.
If Microsoft were to decrease in value and drop to $99 per share, you would be out $30.
However, the upside is that you only lost $30 compared to the $100 loss if you had purchased the shares.
Advantages and Risks of Trading Options
Options are cost efficient and provide serious leveraging power.
As an investor, you can purchase an option position similar to a stock position.
However, you do not need to buy the stock itself.
The downside is purchasing options that expire without being exercised.
Options allow you to hedge your investments.
When not properly understood, options can be a waste of money.
Options can produce greater returns…
…but options can also produce greater losses (i.e., you lose 100% of your investment when the option is not exercised).
But remember, you could lose significantly more by purchasing the stock.
Finally, options are a strategic alternative to investing in equity.
Who wants to trade options on Webull?
When trading options online through traditional brokerages…
…most brokers charge a base per-trade fee and a per contract fee.
From there, most brokerages charge an exercise fee when you decide to exercise your option.
If that is not enough, brokerages also charge an assignment fee when your option is sold or bought.
With all these fees, is trading options worth it?
Well, it depends who you use as your brokerage.
With Webull, you can trade options with:
- NO commissions
- NO contract fees
- NO assignment fees
- NO exercise fees
Sign up for Webull
Signing up for Webull is extraordinarily easy.
Simply use your phone number or e-mail address.
The Webull mobile app is available on iOS and Android.
From there, you provide the standard brokerage account information.
This information includes things like your name, address, social security number, etc.
You will also need to provide identification, like a driver's license or passport.
Once these steps are complete, you can access your account in minutes.
The best part about the sign-up process is that there is no financial commitment to receive your share of free stock.
That is right – no minimum deposit, no trades, and no banking information.
The only thing you need to do is get your account OPEN.
What do you have to lose in this scenario?
I will answer for you – nothing!
Furthermore, there is never a minimum account balance required for your account.