In an attempt to understand the psyche of the retail investor, I decided yesterday to open a new brokerage account. As opposed to the exhaustive process that was undertaken to open accounts in the name of my firm, Excelsior Capital Partners, I figured opening an account in my own name would be easy. I figured right.
I am not sure why I chose Webull, other than some bad associations with Robinhood, given that platform's repeated failures during episodes of elevated market volatility. So, I downloaded the Webull Android app and went through the account opening process. No hassles. In fact, my account was approved for trading at 2 a.m. ET, but I did not know until much later because Google flagged the emails from Webull as spam.
That minor hurdle cleared, I linked my Webull account to my Chase (JPM) account and went through the funding process. In the spirit of goodwill, and within 10 minutes, Webull gave me account credit in the amount of my deposit of $1,000, which will take up to five business days to clear. It is a margin account, so I signed disclosures agreeing to the extension of credit.
I figured I could fund the account and do a trade on the same day. Actually that all happened in the same 15 minutes. That's where the fun is, I guess.
My initial trade was in Euronav (EURN) . Yes, I find the oil tanker shippers to be incredibly undervalued. I have noted this in many Real Money columns and would further note that EURN's dividend for the first quarter of 2020 of $0.81 will be paid June 26 to shareholders of record on June 16. I can pay under $10 now and get more than 8% of that back in a couple weeks. That type of dividend capture strategy only really creates economic value if the shares are held for multiple dividend payment periods (they will be) or the stock rises in anticipation of the dividend (I hope it does.
For some reason, Webull's app was only showing me enough buying power to purchase 99 EURN shares with a market order, even though the last trade price was shown as $9.85. Actually, though, that was the last trade 15 minutes ago. I have not yet signed up for real-time quotes from Webull. Details. Will worry about that later.
So, my first trade was to purchase 99 EURN shares at $9.84.
My strategy is based on increasing the already-massive yield of my underlying holdings by writing call options against my positions. I call this "dividends on steroids." Option contracts are denominated in lots of 100 underlying shares, so I need 100 EURN shares to execute my strategy. So, I bought one more EURN share about five minutes after my first trade. What did I pay? I am not really sure, since Webull's "Trade Confirmation" tab says it generally gives that info the next business day.
Now, my position stood at 100 EURN shares and I wanted to write a call against that position. I chose the July expiration to minimize the chances of getting the shares called away and missing that fat $0.81 divvy at the end of June. Near-the-money strike prices are best for income maximization, so I put in an order for one EURN July $10 call. Denied. Since my money is not actually in the account as of yet, I can't write an options contract. Slightly disappointing, but when my deposit clears, I will complete that trade.
I did a trade with borrowed money on old price information and got a nice little bonus out of it. Yes, I earned my free stock.
According to Webull I "won'' one share of Genworth Financial (GNW) as a bonus for the opening of my account. GNW has been a brutal performer for years, but it only cost Webull $3.28 to give me one share, so that's an efficient promotion. That share will appear in my account within seven business days.
I am now a day trader. I am thinking of changing my name to Chad and referring to everyone in my office as "Bro." It's a brave new world out there and I am part of it. Webull's cool graphics told me absolutely nothing about the stock I was purchasing or even the exact price I paid for it, but I am now "in the game."
Buying stocks is not a game. I do admit that it can be fun. Those who treat it as a game -- I intentionally did zero research on the ownership and capitalization of Webull before writing this article, but I am curious -- will suffer the consequences sooner or later.
My Webull account is now showing a $3.95 unrealized loss on my EURN position. Yo, Chad ... should I sell?
