Shares of Webull (BULL 0.14%) are soaring today, rising as much as 14% around 3 p.m. ET. The move was driven by heavy call options activity, not company news.
NASDAQ: BULL
Key Data Points
How call options can fuel their own fire
Day traders crowded into Webull's call options on Wednesday. Trading volumes were about three times the usual level, resulting in the unusual situation of daily trades outnumbering the open interest positions for several short-dated call options. Traders chiefly bought the weekly June 12 calls at the $6 and $6.50 strikes, betting the stock would keep running. These strike prices are just above last night's closing price of $5.41 per share.
Short-dated call buying can be self-reinforcing. Dealers who sell calls often hedge incoming option orders by purchasing shares, which adds upward pressure. The reverse is also true: if the stock fails to clear key strike prices, those hedges unwind, and the stock can give back gains quickly.
Image source: Getty Images.
Day trading just got easier for small accounts
The timing isn't random. FINRA's new intraday margin rules kicked in on June 4, scrapping the old "pattern day trader" requirements. Before the change, accounts needed $25,000 in equity to day trade freely. Smaller accounts were capped at three day trades per five business days. Those guardrails were designed to limit risk for retail investors.
Webull is marketing the change directly. The company's website now reads "Day trade without the $25K minimum." In April, U.S. CEO Anthony Denier called the update "a meaningful evolution in how active traders can participate in the markets."
With Webull's average account holding less than $5,000 of assets, the rule change applies to the company's largest user cohort. Over time, Denier expects at least 20% more transactions per day under the looser day trading rules.
The sudden inrush of options activity isn't directly caused by FINRA's rule change. It was simply inspired by traders reacting to the rule change as a bullish catalyst for Webull itself. And the rule change put Webull squarely in the spotlight of active traders looking for a play.
Webull's business model benefits when its customers trade more. Whether the regulatory shift translates to sustainable revenue growth should become clearer in the next few earnings reports.
