AFRM Plummets 6% Amid Trump's Credit Card Rate Cap Threat – Is This a Buying Opportunity or a Warning Sign?

Summary
• Affirm Holdings (AFRM) trades at $77.65, down 6.07% from its previous close of $81.80
• Intraday range spans $75.25 to $84.65, reflecting sharp volatility
• Turnover surges to 7.77 million shares, 2.81% of float

Today’s selloff in Affirm Holdings has been fueled by President Trump’s aggressive proposal to cap credit card interest rates at 10%, sparking regulatory uncertainty. The stock’s 6% decline mirrors broader sector jitters, with PayPal (PYPL) up 0.017% as a sector leader. Traders are now parsing technicals and options data to gauge whether this is a short-term panic or a structural shift in consumer finance.

Trump's Credit Card Rate Cap Threat Sparks Volatility in Buy-Now-Pay-Later Sector
President Trump’s ultimatum to cap credit card rates at 10% by January 20 has triggered a flight from traditional lenders and a mixed reaction in buy-now-pay-later (BNPL) platforms. While Affirm’s model—relying on merchant fees and installment loans—could theoretically benefit from reduced credit card competition, the immediate market reaction reflects uncertainty. The threat of regulatory overreach and potential legal challenges has created a risk-off environment, with investors reassessing the long-term viability of BNPL as a consumer finance alternative.

Consumer Finance Sector Reacts to Regulatory Uncertainty – PayPal Holds Steady
The consumer finance sector is split in its response to Trump’s proposal. PayPal (PYPL), a key competitor in digital payments, has seen minimal price movement (0.017% gain), suggesting market confidence in its diversified revenue streams. In contrast, Affirm’s sharp decline highlights its higher sensitivity to regulatory shifts. While BNPL platforms like Affirm could gain market share if credit card rates are capped, the sector’s mixed performance underscores divergent risk profiles and business models.

Options and ETFs for Navigating AFRM's Volatility – Strategic Plays for 2026
• MACD: 2.85 (bullish divergence from signal line 2.13)
• RSI: 64.24 (neutral, avoiding overbought/oversold extremes)
• Bollinger Bands: Price at $77.65, below middle band $75.77
• 200D MA: $66.81 (strong support ahead)
• AFRU ETF: -10.51% (leveraged AFRM ETF underperforming)

Affirm’s technicals suggest a short-term bearish bias but long-term bullish setup. Key support levels at $68.48 (200D MA) and $66.09 (lower Bollinger) are critical for near-term direction. The T-REX 2X Long AFRM Daily Target ETF (AFRU) remains a high-risk leveraged play, but its -10.5% drop today signals caution. For options, focus on out-of-the-money puts with high implied volatility and gamma to capitalize on potential downside.

Top Options Picks:
• AFRM20260116P68 (Put, $68 strike, 1/16 expiry):
- IV: 73.93% (high volatility)
- Leverage: 425.94% (aggressive payoff potential)
- Delta: -0.075 (moderate sensitivity)
- Theta: -0.044 (rapid time decay)
- Gamma: 0.021 (responsive to price swings)
- Turnover: $4,286 (liquid)
- Why it stands out: High IV and leverage make this ideal for a 5% downside scenario (projected payoff: $1.35).

• AFRM20260116P70 (Put, $70 strike, 1/16 expiry):
- IV: 69.06% (moderate volatility)
- Leverage: 219.06% (balanced risk/reward)
- Delta: -0.120 (strong directional bias)
- Theta: -0.044 (accelerated decay)
- Gamma: 0.032 (high sensitivity)
- Turnover: $21,991 (high liquidity)
- Why it stands out: Strong gamma and turnover ensure responsiveness to price swings, with a projected payoff of $6.65 in a 5% drop.

Action Alert: Aggressive bears should target AFRM20260116P68 for a short-term play if $68.48 support breaks. For a balanced approach, AFRM20260116P70 offers liquidity and directional clarity.

Backtest Affirm Holdings Stock Performance
The backtest of AFRM's performance after an intraday plunge of at least -5% from 2022 to the present shows favorable short-to-medium-term gains. The 3-day win rate is 51.30%, the 10-day win rate is 51.10%, and the 30-day win rate is 54.89%, indicating a higher probability of positive returns in the immediate aftermath of such events. The maximum return during the backtest period was 13.98% over 30 days, suggesting that AFRM can offer decent gains even after significant intraday declines.

AFRM at a Crossroads – Position for a Regulatory-Driven Rebound or Risk-Off Retreat
Affirm’s 6% decline reflects regulatory uncertainty but also sets up a potential rebound if the market digests the Trump proposal as a short-term scare. Key technical levels at $68.48 and $66.81 will determine near-term direction. The sector leader, PayPal (PYPL, +0.017%), remains resilient, suggesting broader consumer finance demand isn’t collapsing. Investors should watch for a breakdown below $68.48 to confirm bearish momentum or a rebound above $75.77 (middle Bollinger) to reinvigorate longs. Act now: Short-term bears target AFRM20260116P68, while bulls monitor $66.81 support for a potential reversal.