If you're a day trader, you may have heard of the Pattern Day Trader (PDT) rule, which is a regulatory designation for investors who execute four or more day trades in a five-business-day rolling period using a margin account.
Webull, a popular online brokerage firm, has its own set of rules when it comes to PDTs.
In this article, we'll explain Webull's PDT rules and what happens if you violate them.
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If you're using a margin account, you need to be aware of the rules to avoid potential penalties.
Once you're designated as a PDT, FINRA requires account holders to maintain at least $25,000 of equity in their account as of the close of every trading day.
This is where Webull's PDT rules come into play.
If your margin account falls below the required $25,000 minimum equity, an Equity Maintenance (EM) call is issued.
The EM call will restrict you from day trading and receiving intra-day replenishment on closing transactions.
Essentially, this means you won't be able to make any more day trades until you bring your account equity above $25,000.
If you complete a day trade while in an EM call, your account will receive a DT call for the total notional amount of the trade, and your account will be closed until both calls are met or after 90 days.
To meet the EM call, you can deposit cash or securities to get your equity above $25,000.
The EM call amount will be the difference between $25,000 and your account equity value at the end of the day.
You must end the day above $25,000 for the call to be closed.
Webull will use the closing price of the regular session to calculate your equity.
If you're unable to meet the EM call by bringing your account value above $25,000, Webull offers a One-Time reset for your PDT violation that can only be used once during the life of your account.
However, this reset comes at a cost.
You'll have to pay a fee of $500 to reset your PDT status and regain your day trading privileges.
In conclusion, if you're using a margin account on Webull, it's important to be aware of the PDT rules and to maintain at least $25,000 of equity in your account at all times.
If you do fall below the minimum equity requirement, you'll receive an EM call and won't be able to make any more day trades until you bring your account equity above $25,000.
If you're unable to do so, you can use Webull's One-Time reset, but it comes at a cost.
As always, it's important to fully understand the rules and regulations of your brokerage firm to avoid any unnecessary penalties.
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