Closing Transactions Only For These Penny Stocks
In a relatively sweeping and unified move by several brokerages, access to volatile stocks was barred on Thursday. Apps like Webull and Robinhood had a growing list of penny stocks and even blue-chips restricted from opening orders. As of 11:50 AM EST, Robinhood blocked opening trades on more than a handful of stocks.
Robinhood Stocks Blocked From Opening Trades
- AMC (NYSE: AMC)
- Express (NYSE: EXPR)
- GameStop (NYSE: GME)
- Sundial Growers (NASDAQ: SNDL)
- Castor Maritime (NASDAQ: CTRM)
- Nokia (NYSE: NOK)
- Trivago (NASDAQ: TRVG)
- Koss Corp. (NASDAQ: KOSS)
Those are just on the list of current or former penny stocks meeting the $5 & under range in the last few weeks. Other blue-chip stocks, including BlackBerry (NYSE: BB) and Bed Bath & Beyond (NASDAQ: BBBY), among others, were also blocked.
In a blog post from Robinhood, the brokerage app said:
The post continued is emphasizing the importance of information. Robinhood aims to provide educational resources and ways for its users to make sense of the market. But as to a reason behind restricting access, Robinhood simply stated it was due to increased volatility
We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AAL, $AMC, $BB, $BBBY, $CTRM, $EXPR, $GME, $KOSS, $NAKD, $NOK, $SNDL, $TR, and $TRVG. We also raised margin requirements for certain securities.
Webull Closes Access To Penny Stocks
Robinhood penny stocks weren’t the only ones getting a restriction. Webull also closed off access to certain names. In a mirror move to Robinhood, the app tweeted that it also blocked access to AMC, Koss Corp., and GameStop. In its tweet, Webull said that it no longer allows clients to open new positions in these stocks “due to the extreme volatility” in those symbols.
Other retail brokers this week also placed restrictions on some of these WallStreetBets stocks. TD Ameritrade and Charles Schwab also joined the party. But the question now is, was it called for? Everyone from Mark Cuban and Dave Portnoy to Elon Musk, Chamath Palihapitiya, and Alexandria Ocasio-Cortez expressed their frustration with the moves.
Senator Elizabeth Warren, Democrat of Massachusetts, called on the Securities and Exchange Commission to be more stringent when it comes to regulation as a whole.
“For years, the same hedge funds, private equity firms and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price. It’s long past time for the S.E.C. and other financial regulators to wake up and do their jobs.”
Reddit Stocks Take A Dive
While this is the current case for many actively traded stocks, the results have been shocking for some. GameStop fell more than 50% from its high, Express went from $13.97 to lows of $3.40, and the rest of this list of penny stocks (both current & former) plummeted into a sea of red.
Can an argument be made that this was a means to protect the public mom and pop trader? I’ll leave that up to you, and please leave a comment below. The goal of organizations like the SEC is to uphold an orderly market. As Chamath Palihapitiya recently stated, many hedge funds are feeling the pain after the surge in Reddit penny stocks and blue-chips this year.
In a tweet on January 27th, Palihapitiya posted:
“OH from a Prime Broker:
- biggest 4 day de-grossing from hedge funds they’ve ever seen.
- Multi strats lost last week; traditional L/S guys this week. Hearing funds down anywhere from high single digits to 25%+ YTD.
Markets only down 2.5% so retail buying as funds selling.”
So what comes next for markets & can these Reddit stocks recover? Surely we will see the outcome of these events sooner or later. In the meantime, many traders are left in limbo over whether to sell or hold. Many of the intergalactic moves that these stocks have made are now muted in the wake of brokers’ moves this week.
Where Do You Stand?
We want to hear from you. Are you someone who’s trading penny stocks on Robinhood, Webull, TD, Schwabb, etc.? Was this a valid move to protect traders and the markets? Furthermore, what is your plan if/when these stocks become fully tradeable again? At the end of the day, you can do all the DD possible, study charts, become fully educated, and the like. But if a brokerage decides to shut down access to allow you to freely trade (buy/sell) stocks, what do you do, and are there any repercussions to these events for brokers?
New To Trading Penny Stocks?
If you’re new to trading penny stocks there are a few things that might help get you started on the path of education.
- Get a quick intro to penny stocks – Penny Stocks Trading for Beginners 
- Want an in-depth look at how to research? – The Beginner’s Handbook For Trading Penny Stocks
- Looking to start but don’t know the best penny stock brokers? – Best Penny Stock Brokers
There’s plenty of things you can do to learn how to trade penny stocks effectively, efficiently, and become consistently profitable too. Take your time and even try trading with a simulator first in order to hone your skills before using real money.