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Learn how to use covered calls to reduce the price of buying a call or to hedge for the downside potential of your existing stocks.
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A long call diagonal spread can be viewed as a vertical call spread where the long call ( that is set up in a distant month ) is paid for by multiple sequential short calls that are set up in a proximate month.
You would set up this strategy for a a bullish market environment where you feel that the stock will rise but not rise dramatically.
The long call diagonal spread is set up for a debit. Make sure that the intrinsic value of the long strike is similar to the intrinsic value of the short strike. Do not set up the debit for more than 75% of the strike width of the strikes.
Brokerage services are provided by Webull Financial LLC, a registered broker dealer with the SEC, and a member of FINRA and the SIPC. Your Webull account is protected up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org.
Our clearing firm Apex Clearing Corp has purchased an additional insurance policy. The coverage limits provide protection for securities and cash up to an aggregate of $150 million, subject to maximum limits of $37.5 million for any one customer’s securities and $900,000 for any one customer’s cash. Similar to SIPC protection, this additional insurance does not protect against a loss in the market value of securities.
Webull Financial stays up-to-date with the latest data security in order to protect our investors’ personal information and asset data.
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Capital One Venture Rewards Credit Card
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- No foreign transaction fee
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Intro APR
N/A
Ongoing APR
17.49% – 24.74% Variable APR
Annual Fee
$0 for the first year, then $95
Bonus Value
Enjoy a one-time bonus of 50,000 miles once you spend $3,000 on purchases within 3 months from account opening, equal to $500 in travel
Recommended Credit Score
- 690 – 850
- Good – Excellent
Great For : Travel rewards with an annual travel credit
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Annual Fee 450
APR 18.74%-25.7% Variable
- Enjoy a one-time bonus of 50,000 miles once you spend $3,000 on purchases within 3 months from account opening, equal to $500 in travel
- Earn 2X miles on every purchase, every day. Plus earn 10X miles on thousands of hotels, through January 2020; learn more at hotels.com/venture
- Named ‘The Best Travel Card’ by CNBC, 2018
- Receive up to $100 application fee credit for Global Entry or TSA Pre✓®
- Fly any airline, stay at any hotel, anytime; no blackout dates. Plus transfer your miles to over 12 leading travel loyalty programs
- Miles won’t expire for the life of the account and there’s no limit to how many you can earn
- No foreign transaction fees
- $0 intro annual fee for the first year; $95 after that
Pros
- High rewards rate
- Flexible rewards redemption
- No foreign transaction fee
- Sign-up bonus
Cons
- Has annual fee
- Redemption value for cash is half of value for travel
- Requires good/excellent credit
Summary
Intro APR
N/A
Ongoing APR
17.49% – 24.74% Variable APR
Annual Fee
$0 for the first year, then $95
Bonus Value
Enjoy a one-time bonus of 50,000 miles once you spend $3,000 on purchases within 3 months from account opening, equal to $500 in travel
Recommended Credit Score
- 690 – 850
- Good – Excellent
Long Call Diagonal Spreads
Who is Webull For?
Webull is best for the undercapitalized active trader. These are part-time traders with less than $100k to fund their account with. The zero commissions and advanced platform give new and intermediate traders a way to play small ball and learn how to trade actively.
Webull is also perfect for swing traders of all stripes. Swing traders don’t typically need flawless execution, as they’re looking to capture a large market move rather than a small intraday fluctuation.
Swing traders are also generally quite simplistic when it comes to their analysis. Rarely do they need more than a good charting platform and screener.
Long Call Diagonal Spreads
Who is Webull Not For?
Most full-time day traders are unable to switch to Webull from their current brokers. That’s because highly active traders need direct market access to best play out their trading edge. What they gain in commissions would be lost due to slower execution.
The ability to create sophisticated keyboard macros is also missing in Webull, a feature that day traders heavily rely upon.
Long Call Diagonal Spreads
WeBull vs Robinhood
Robinhood is Webull’s main competitor. Both companies are trying to be the Walmart brokers by offering the lowest price possible to those looking for bargains. Those bargain-seekers are by and large millennials, which is why both companies took a mobile-first approach, only developing desktop and web apps after establishing themselves in the industry.
Let’s go over some key differences between the brokers:.
Long Call Diagonal Spreads
WeBull Research Offerings
Webull has much stronger research and analytics offerings. Their web and desktop platforms feature the following:
- High quality charts (similar to TradingView) with technical indicators
- Stock screener with a surprising amount of features
- Top-down market analytics
- Stock and industry strength rankings
- Daily level of net cash inflows into indexes
- Active trader tools
- Leverage
Webull makes the use of leverage available to all margin accounts. Robinhood, on the other hand, requires you to subscribe to Robinhood Gold, which costs $5 per month plus interest on any margin above $1,000 that is used.
Long Call Diagonal Spreads
Products able to trade
Both Webull and Robinhood have their advantages when it comes to product selection. Robinhood, for example, offers commission-free options and some cryptocurrencies. Webull, on the other hand, doesn’t offer options trading right now but, allows short selling, something Robinhood doesn’t allow on their platform.
Pure stock traders will much prefer Webull, as it gives them the ability to short stocks. Hybrid traders who like to use stocks and options are basically locked into Robinhood until Webull can offer the same.
Long Call Diagonal Spreads
WeBull Stock Screeners
Stock Screener
Webull’s stock screener isn’t the most comprehensive but its still pretty impressive. It has a few filters and limited customization possibilities. However, it’s important not to judge the platform in a vacuum.
With Webull’s free commissions, their main competitor is Robinhood, who doesn’t offer any stock screening capabilities. On the bright side, the screener has some pretty sophisticated preset technical filters that screen for specific technical setups. Things like MACD golden crosses, bullish engulfing patterns, and three white soldiers patterns.
Long Call Diagonal Spreads
WeBull Fees and Subscriptions
Webull Commissions and Fees
Webull doesn’t charge any commissions for trades, and only requires you to pay SEC and FINRA fees, which you would pay with any other brokerage, including Robinhood.
These fees are pretty inconsequential, with SEC fees being $23.10 per million dollars of trading volume, while FINRA fees are $0.000119 per share.
Software Fees
Webull’s platform is completely free, but they charge for premium data. They currently offer several different data packages:
- Toronto Stock Exchange Level 1: $24.99/month
- Nasdaq Basic: $2.99/month
- National Best Bid and Offer: $9.99/month
- Taiwan Stock Exchange Level 1: $2.99/month
- Hong Kong Stock Exchange Level 2: $59.99/month
- London Stock Exchange Level 1: $16.99/month
- Deutsche Borse Level 1: $9.99/month
Traders who utilize time & sales (“the tape”) in their trading will need to subscribe to a premium data feed, as it’s not included for free within the platform. This is in contrast to a platform like TD Ameritrade’s thinkorswim, which provides free time & sales data.
Discounts are offered if you buy an annual subscription instead of monthly.
Webull is a stock brokerage firm offering zero commission stock trades on both mobile and desktop. They’re currently the biggest threat to Robinhood when it comes to acquiring millennial users with free services.
Webull started out as a research firm and have only recently branched out into the brokerage industry. This puts them way ahead Robinhood in the way of research and analytics, Robinhood’s weakest link.
Pre-Market and After Hours Trading
All Webull members have the ability to trade during the pre-market or after hours trading periods, while Robinhood requires a paid subscription to Robinhood Gold.
Webull allows you to trade between the hours of 4am to 8pm EST.
Paper Trading
Webull offers an advanced paper trading platform, through which they hold daily and weekly competitions with monetary prizes. It further proves their dedication to the budding trader.
Can You Trust Webull?
Webull has SIPC insurance, which provides coverage of up to $500,000 for each account. This insurance protects clients from the loss of cash and securities held at a brokerage firm. The company is also registered with FINRA, and has a clean BrokerCheck record.
These two protections are standard in the brokerage industry, and protect the vast majority of clients from any loss due to the firm itself.
A Word of Caution
When speaking about “free” services, the quote “If you’re not paying for the product, you are the product” often comes up, and it’s especially true in the case of free stock trading apps.
Webull likely makes a large portion of their revenue through a practice called payment for order flow. In other words, large market making firms will pay firms like Webull and Robinhood to interact with their clients’ order flow before the rest of the market.
Many would ask in this situation: how are Webull and Robinhood able to offer free commissions when the big brokers like E*TRADE and TDAmeritrade are also able to sell their order flow?
A recent analysis done by Logan Kane found that Robinhood makes more than ten times per dollar of order flow they sell than E*TRADE.
The choice between Webull and Robinhood ultimately comes down to your trading product preferences. Those who trade lots of options are forced to stay with Robinhood, and Webull is a no-brainer for those who only trade stocks.
Hope you enjoyed our thorough Webull review. If you have any questions or comments, let us know below!
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Long Call Diagonal Spreads
Ideal Conditions for a Long Call Diagonal
Long Call Diagonal Spreads
Ideal Conditions for a Long Call Diagonal
Long call diagonal spreads should ideally be used in a stock is slightly bullish in the short term but very bullish in the long term.
It should be set up in periods of relatively low volatility as you do not want the short option to be compromised by price sudden and extreme price movements.
Long Call Diagonal Spreads
Profit and Loss Chart
- Maximum Profit Potential: Unlimited
- Maximum Loss Potential: Premium Paid for the Call
- Expiration Breakeven Price: Call Strike + Premium Paid for Call
- Estimated Probability of Profit: Less Than 50%
- Assignment Risk?
Option Basics
How Does a Long Call Diagonal Option Change with Volatility and Time
A long call diagonal option will benefit from :
- Because of the short option in a proximate month, long call diagonals will benefit from time decay and drops in volatility
- Because of the long option in a distant month, long call diagonals will suffer from time decay and lower implied volatility as you approach the long option expiration.
- Positive Delta – Call prices rise when the stock price increases, which benefits the call buyer. Conversely, call prices fall when the stock price decreases, which is not good for the call buyer.
- Positive Gamma – A long call’s position delta gets closer to +100 as the stock price increases and closer to 0 as the stock price decreases.
- Negative Theta – The extrinsic value of options decays as time passes, which is detrimental to a call buyer
- Positive Vega – An increase in volatility will increase the value of a call option ( indicated by positive vega ). Conversely, a decrease in volatility will decrease the value of a call option ( indicated by a negative vega
Buying a Call
Management and Adjustments
- Maximum Profit Potential: Unlimited
- Maximum Loss Potential: Premium Paid for the Call
- Expiration Breakeven Price: Call Strike + Premium Paid for Call
- Estimated Probability of Profit: Less Than 50%
- Assignment Risk?
Option Basics
Tips and Tricks
A call option will benefit from :
- A rise in stock prices
- A rise in volatility
- An early rise in stock price ( time kills the stock value )
Buying ITM -in the money call options will
- Increase the amount of directional exposure since in the money options have deltas closer to +1
- ITM options are less affected by theta decay