Can You Buy Penny Stocks on Webull?

If you’re looking for a way to invest small sums of money, penny stocks can be a great option. But where can you buy penny stocks? Webull is a broker that offers low-cost trades and allows you to invest in penny stocks. But what about buying penny stocks on Webull?

Can you Buy Penny Stocks on Webull? You cannot buy most penny stocks on Webull. Webull does not support trading OTC stocks. The only penny stocks supported by Webull are stocks that trade on either the NASDAQ or NYSE.

In order to trade penny stocks, you would need to use a different stock broker.

Penny Stock Restrictions on Webull

Most penny stocks are not available for trading on Webull. They are typically not listed on the major exchanges and, as such, do not meet the listing requirements to be traded on Webull.

There are a limited number of penny stocks that are available for trading however, and most investors should avoid them due to the high level of risk associated with these securities.

Penny stocks are not like other stocks. They are much more volatile and have a much higher risk. For that reason, there is a minimum order requirement to buy penny stocks on Webull.

Penny Stock PriceMinimum Number of Shares Per Order

Why You Can’t Buy Penny Stocks on Webull

There are a few reasons why you can’t buy penny stocks on Webull. One reason is that Webull does not have access to the Over-the-Counter (OTC) system, which is where most penny stocks trade. Without access to the OTC system, Webull would only be able to offer a limited selection of penny stocks.

Another reason is that penny stocks are generally considered to be more volatile and risky than other types of stocks. For this reason, some brokerages like Webull choose not to offer them. This is because they want to protect their clients from losing money in a volatile investment.

As an investor, you must know that the Webull platform provides most of the listed instruments like

  • Equities
  • Options
  • ADRs 
  • ETFs 

These are the most liquid of options with complete information available to the investors to take decisions on their trades.

This does not apply to the stocks known as Penny Stocks which, due to their classification, are not available on the major stock exchanges for trading.

If you’re interested in investing in penny stocks, there are other brokerages that do offer them.

Where To Buy Penny Stocks

There are a number of online brokers that sell penny stocks, including Fidelity, Charles Schwab, and TD Ameritrade.

You can also buy penny stocks through some traditional brokerages, although they may charge higher commissions.

However, it’s important to remember that penny stocks are generally considered to be high-risk investments, so you’ll want to do your research before buying any shares.

Why Do Stocks Move to the OTC Market?

Securities and Exchanges Commission is mandated to safeguard the interests of all market participants. For the traders, SEC provides laws, regulations, and guidelines to meet its objective.

Regarding Penny Stocks, the message from the market regulator is clear as it is based on their research studies on the matter.

“Academic studies find that OTC stocks tend to be highly illiquid; are frequent targets of alleged market manipulation; generate negative and volatile investment returns on average; and rarely grow into a large company or transition to listing on a stock exchange.”

What Happens to My Stocks That Move to the OTC Market?

In case of a stock you hold moves to the OTC market, it will of course be not possible to add it to your quantity as buying will not be possible. In this situation, you may choose to close your position in the stock.

What other Restrictions Apply on Penny Stocks on Webull?

In case you hold Penny Stocks in your portfolio on Webull, it does not help in your margin value as these are not margin-approved stocks. Owning Penny Stocks on Webull has the twin effect of reduced cash availability and reduced margin due to their nature. 

How Penny Stocks Traded in Real-world Situation?

As against the regulated and centralized stock markets like NASDAQ and NYSE, Penny Stocks are traded in an unregulated manner without any central oversight. These trades are enabled through the network of brokers that bring together sellers and buyers

Companies wishing to offer their securities outside the centralized exchanges also are part of this network. Brokers are hired by businesses offering their stocks in the OTC market.

The top reason for businesses to offer their stocks in the OTC market is no requirement of publishing periodically audited financials under the arrangement. This becomes easier for companies to generate funds from the market.

This also means that the businesses may choose to present any information in any manner they desire to meet their objectives. Typically these disclosures do not meet the stringent SEC requirements of reporting.

That is the point where unsavory elements with dubious intentions can potentially cause harm to a simple investor who is not in a position to evaluate the offer in a useful manner. This concern underlies the position taken by the regulators and imposed by Webull. 

How Can a User Stay Away from Penny Stocks?

As per one definition, stocks that are available below $5 value are called Penny Stocks. So, it is advisable to keep an eye on your portfolio proactively. Prices that are too low are a good signal to take action on getting out of such a position.

Another attribute that comes into play is that of the trading volume. The stocks that are not in demand do not see much trading (low liquidity) thereby making their average trading volume to be quite as compared to averages.

It is in the interest of the investor to stay away from low liquidity stocks as one may not be able to sell the stock if required for any reason. Their low value, in any case, does not help much in the case of the liquidity requirement of a trader.

How Do Penny Stocks Come Into Being?

Very low prices stocks do have some story behind their situation. Most of these belong to the under-performing business for a variety of reasons. Savvy investors can identify such stocks and stay away from them.

This leads to their low volumes on the trading platforms and a downward spiral leads to their delisting from the major exchanges. This is the stage when the business and brokers take over their trading in the OTC market.

At times, the businesses themselves operate through the OTC market to generate funding from investors due to the easier process. Some of these businesses may perform well enough and at some stage may be able to go through the stringent vetting for listing on the major stock exchanges. 

How Can I Sell My Penny Stocks?

It is not possible to trade in Penny Stocks on Webull. However, it is possible to use brokers that deal in the OTC market. As it is not illegal to trade in Penny Stocks, well-known brokers provide their services in the OTC market.

Webull does not recommend the brokers to trade Penny Stocks. However, it is fairly easy to find the names of the brokers who can help in dealing with the Penny Stocks. 

Several reports comparing various options are also available on the internet. The interested users may use such means to sell Penny Stocks outside of the Webull platform.