Webull Margin Account

Webull Margin Rates and Margin Account in 2022


Current Webull margin account rates: interest fees charged on margin loan. Webull margin requirements, base lending rate (BLR), leverage, and broker lending cost.


Webull Margin Rates


Debit Balance Margin Rate
under $25,000 6.99%
$25,000.01 - $100,000 6.49%
$100,000.01 - $250,000 5.99%
$250,000.01 - $500,000 5.49%
$500,000.01 - 1,000,000 4.99%
1,000,000.01 - 3,000,000 4.49%
>3,000,000.00 3.99%


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Margin Investing


Margin can be a complicated, confusing, and misunderstood topic. By the end of this article, you will have a better understanding of exactly how margin and margin rates work. Let’s dive in and discuss margin specifically with Webull.

Margin simply means borrowing money from your broker to either trade with or to withdraw and using the cash and securities in your account as collateral. In essence, it’s a loan from your broker. Margin is not free and Webull determines the rates of how much it costs to borrow money from them. Webull also determines what securities are marginable or not and how much the margin requirement is for each security.


Opening a Margin Account With Webull


In order to get margin with Webull, you can either choose the margin option when first opening your account, or you can switch to a margin account from a cash account once it is open.

There are a lot of risks and rules involved with margin, so you have to agree to Webull’s margin agreement and disclosures. Each broker has different rules and guidelines for how margin works, so you definitely want to familiarize yourself with Webull’s specific rules before you start using margin with them.


Webull margin account opening


Requirements for Margin With Webull


Webull offers two types of accounts: an individual non-retirement brokerage account and an IRA. Margin is only eligible on the individual non-retirement brokerage account. In order to use margin, you must maintain a minimum of $2,000 of equity in your account which includes cash and securities.


Benefits of Margin vs Cash Account With Webull


The benefits of having a margin account include the ability to day-trade, short sell, trade on unsettled funds, and borrow money from Webull for trading or withdrawal. Margin opens up a whole new world of possibilities that you may have not even known existed with your brokerage account.


Margin Leverage on Webull


The first term you need to understand when it comes to margin is leverage. The term leverage means how much your money is magnified. The easiest way to think about leverage is the total amount of money you can put towards a trade.

The higher the leverage, the more money you can put towards a trade. Leverage includes your capital plus the amount you are borrowing from Webull in margin. We will use Apple stock, symbol AAPL, as an example to explain how leverage works.

You first need to check on Webull if the stock is marginable or not. You can reference the screenshot below which shows the steps on how to do this.


AAPL margin info


AAPL margin info


As you can see from the screenshots, AAPL is both marginable for a long position and a short position. Overnight Leverage (Long) showing the number 2 means if you have $10,000 of cash, you are allowed to buy and hold up to $20,000 worth of AAPL.

Day-Trade Leverage (Long) showing the number 4 means that you are allowed to day-trade AAPL for up to 4 times the amount of buying power you would normally have in a cash account. If you have $10,000 of cash in your account, you can buy up to $40,000 worth of AAPL, specifically for day-trading purposes.


Margin Requirements on Webull


This brings us to the second term that you need to understand when it comes to margin which is margin requirement or margin maintenance. In the case of Webull, these terms mean the same thing and are interchangeable.

In the example with AAPL, your maintenance requirement is 25%. In order for you to buy a total of $40,000 worth of AAPL, you are borrowing $30,000 from Webull and they are requiring you to put up 25% of that money which is your $10,000 of cash.


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Margin Rates


The $30,000 that you are borrowing from Webull leads us into the third and final term you need to understand when it comes to margin which is margin rates. The margin rate is the interest rate that Webull charges you to borrow money from them. The rates are tiered based on how much money you are borrowing.

As you can see from the screenshot, in exchange for borrowing $30,000 from Webull they are going to charge you an annual interest rate of 6.49%. That might sound high, but the interest accrues daily so you are only charged for the number of days that you hold AAPL overnight. If you day-trade and you don’t hold anything overnight, you will never pay any margin interest.

If you were to borrow $30,000 of AAPL for 5 days overnight, you would owe Webull approximately $27.04. This is calculated by the following formula that Webull uses: borrowed amount x (margin rate/360) x number of days held. Inputting our numbers into the formula looks as follows: $30,000 x (.0649/360) x 5. Your total margin interest for the previous month is charged to you in the middle of the following month.


Using Margin to Borrow Cash to Withdraw


A lesser-known fact about margin is that you can use the securities in your account as collateral to borrow money against and withdraw it as cash from your account. There are both advantages and risks of margin borrowing to withdraw cash from your broker versus getting a loan at a bank.

The main advantage is that you don’t necessarily have any specific terms for paying the money back. There are no required monthly payments and no late fees. You are allowed to pay the money back whenever you want, in any amounts you want. You will just continue to get charged interest until you pay the money back fully.

The main risk is you could find yourself in a margin call if you borrow too aggressively and/or if the securities being held as collateral were to tank. For example, let’s say you have $100,000 worth of securities in your account, and you withdraw $50,000 worth of cash. If those securities were to seriously drop in value, Webull might get uncomfortable with that level of risk you are putting on them. Therefore, they will give you a margin call telling you that you need to deposit a certain amount of cash back into the account or they will be forced to liquidate some of your securities.


Margin Trading for Options


In order to trade certain options strategies with Webull, you need to have a margin account. Any option spread such as debit spreads, butterflies, and condors require a margin account. The main reason for this is because when you are dealing with certain options strategies of which assignment and exercise are likely going to be involved by expiration, it can put huge risk on Webull if your account can’t support the underlying shares.


Short Selling


In order to be able to sell short, you have to have a margin account. Short selling generally involves more risk than buying long. Therefore, the margin maintenance requirements are usually higher and as a result, the leverage you get is usually lower.

Stock symbol WKHS is a good example of a volatile stock that has some pretty extreme short selling margin requirements with Webull. As you can see in the screenshot below, WKHS isn’t eligible for using margin for a long position, but you can enter a short position. The day-trade leverage and overnight leverage for short selling are both 0.5 and the maintenance requirement is 200%.


WKHS margin


What these numbers mean is that you have to put up double the amount of capital compared to the value of the short position you are going to take. In other words, if you have $10,000 of cash in your margin account, you would only be able to sell short $5,000 worth of WKHS. This seems backwards but it’s completely accurate and it is a perfect example of how complex and complicated margin trading can be.


Settlement


Another benefit of using a margin account vs. a cash account is how settlement works. When you sell a security in a cash account, you have to wait 2 business days after the day you sell in order for those funds to be settled. This isn’t a big deal if you only do a few trades a year however, if you plan on trading with any sort of regular frequency then you are going to run into issues with settlement.

The issue that you are going to run into specifically is called a Good Faith Violation. This violation is extremely common and can be very frustrating if you don’t understand settlement rules. With a margin account, you don’t have to wait any amount of time for settlement.

You are allowed to trade on unsettled funds immediately and you can’t get a Good Faith Violation in a margin account. If your account value is under $25,000, be careful with how frequently you are trading though because if you do more than three day trades in a five-business day period then you will be labeled as a Pattern Day-Trader. Being a Pattern Day-Trader comes with its own huge list of rules and regulations that you may not want to get involved in.


Margin Calls


There are different types of margin calls and each of them have different causes and ways of meeting them. The most common type of margin call is a Required Maintenance Call. This type of call occurs when your account equity falls below your margin maintenance requirement.

Let’s go back to the example of having $10,000 cash in your account and day-trading up to $40,000 of AAPL with 4x leverage. If you were to hold the $40,000 of AAPL overnight, you would end up with a required maintenance margin call the next day. This is because the 4x leverage and the 25% maintenance requirement is ONLY for day-trading purposes.

Your leverage for holding overnight is 2x (refer to the earlier screenshot) and therefore your maintenance requirement for holding overnight is 50% or $20,000. You would have a required maintenance call of $10,000 because this is how much you are short on your maintenance requirement and as a result, Webull would issue you a margin call of $10,000 that you would need meet or be at risk of having some of your AAPL liquidated.

Webull is willing to give you more leverage when day-trading versus holding overnight because it’s much easier to manage risk when the market is open compared to the unpredictability that can happen overnight when the market is closed.


Risks of Margin


In addition to margin calls, there are a number of other different risks when using margin. One of the biggest risks is that you can actually lose more money than you started with. Yes, you read that correct… You can actually lose more money than your original capital that you put into your account.

Let’s say you have $10,000 of cash and you decide to go all in on day-trading $40,000 of AAPL. So again, $10,000 is the money that you put into the account and $30,000 is money you are borrowing from Webull. Let’s say the value of your AAPL position was to sink down to just $25,000. You then decide to sell your position.

The $25,000 would automatically first go towards paying back the $30,000 you owe Webull and you would still owe them $5,0000. And your capital would be gone! So, you lose your $10,000 AND you owe Webull $5,000.

Another risk of margin is not understanding exactly how to read your balances in your margin account and ending up accidentally using margin when you didn’t mean to. You could go for days or even months borrowing money on margin and not realize it meanwhile, the whole time you are being charged margin interest.


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Webull Margin Investing Conclusion


Margin has many benefits but also many risks. Make sure to understand exactly what you are getting into with a margin account and exactly what you are doing with each margin trade that you do. Webull offers an abundance of resources to help you learn and understand about using margin with them.

Author: Updated on 3/28/2022.

About the Author
Paul Johnson is a Licensed Stockbroker with 7+ years of experience in the financial services industry. Paul enjoys teaching about investing and writing about financial topics. He is a husband and father of twin boys.