Options Trading

1 Call and Put Options

There are two types of options contracts: Calls and Puts. A call option gives the buyer or holder the right to purchase the underlying security at a specified price. On the other hand, a put option gives the buyer or holder the right to sell the underlying security at a specified price.

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2 Premium

Premium on an options contract is the total amount that an investor pays for an option. For example, an option contract that trades for a premium of USD1 is worth USD100 as each contract covers 100 shares.

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3 Strike Price

The strike price is the pre-determined price at which the option contract can be exercised:

• For calls, the underlying stock price exceeds the strike price.
• For puts, the underlying stock price falls below the strike price.

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4 In /At /Out of the Money

• When an options contract has intrinsic value, the contract is in the money. A call option is in the money when the underlying asset’s price exceeds the agreed-upon price. A put option is in the money when the underlying asset’s price falls below the agreed-upon price. All in all, options traders want the option contracts to always be in the money.
• When the option contract’s underlying asset’s price is equal to the strike price, the contract is at the money.
• When an options contract does not have intrinsic value, the contract is out of the money. A call option is out of the money when the underlying asset’s price is lower than the agreed-upon price. A put option is out of the money when the underlying asset’s price is higher than the agreed-upon price.

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5 Expiration Date

Options carry an expiration date which specifies the final day the option contract exists or is valid. The American style options, supported by Webull, allow the option holder to exercise the contract at any time before, including the day of expiration. Any contracts owned at least USD0.01 in the money at expiration will be automatically exercised. Those at or out of the money at expiration will expire worthless.

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6 Break-Even

The break-even point is the point at which the investor neither profits nor loses money.

• For call options, the break-even point can be calculated by adding the strike price and the premium.
• For put options, the break-even can be calculated by subtracting the premium from the strike price.

7 Trading Time

Options trading hours fall between 09:30-16:00 ET from Monday to Friday, until the option is set to be expire. However, a limited number of option contracts can be traded until 16:15 ET.

Disclaimer: Options trading involves significant risk and is not suitable for all investors as investors may be exposed to potentially rapid and substantial losses. Options trading functionality is subject to Webull Securities' review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

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