Is IB the only firm that allows one to daytrade your IRA in a margin account? And by margin, I mean not having to wait 3 days for the trades to settle. I don't mean borrowing or shorting.
Are you sure IB allows that? I don't think so. With my wife's IRA the three-day rule is enforced, though IB does allow one to trade stock futures, which do not required any settlement at all.
That's my understanding, based on this: http://www.interactivebrokers.com/en/accounts/iraClasses.php US resident customers may open cash or margin Individual Retirement Accounts (IRA). IRA margin accounts may never borrow, but are afforded all the other benefits of a margin account such as the ability to day trade, and the ability to trade multiple currencies and multiple currency products. Am I right? Can you daytrade the same funds over and over again?
My IRA is with E-Trade but in conversation with IB, I believe they are the same as E-Trade re the re-use of funds in an IRA. For example, if I have 50K in my IRA and buy 50K worth of ABC stock in the morning and later in the day sell the stock and with the proceeds buy XYZ stock (this is allowable since the funds are immediately available (with some brokers) after selling ABC. But lets say the next morning , after I have my OJ, I look at XYZ and it is tanking since XYZ just announced crappy earnings. I immediately sell my XYZ stock and guess what ? My account is immediately placed in a 90 day restriction per Reg T for freeriding ! The reason being is that I sold XYZ BEFORE ABC settled (3 day settlement period) Thus daytrading in an IRA under the above can be tricky. If you use the proceeds of your first sale to buy stock, the first must settle before you can sell the second. Hope this helps.
So to get around that, you'd need to split up your 50k into a few streams, say 3-4, and then keep track of where you stand, making sure that each stream, if reinvested immeadiately, isn't sold within that 3 day period.. Is that about right? I wonder why IB says it's a 'margin account then? Maybe because you can reinvest immeadiately?
Yes: thats correct. You have to keep track of settlement dates and if you own stock with unsettled funds it can become rather cumbersome if you do multiple buys and sells within a short timeframe. I've suggested to E-Trade that they show the funds that are available (i.e settled) by date. They said they would consider updating their system to show this but I'm not holding my breath. To the best of my knowledge, not IB or any broker will allow you to set up an IRA as a margin account. An IRA by its definition is considered a cash account. There are probably SEC rules governing this. You might want to talk specifically to IB (good luck) and other brokerages directly to double check.
With so-called "margin" IRAs with IB there's no problem using proceeds of a sale to buy another stock on the same day, without waiting for T+3, but beyond that, day-trading as such does get into the free-riding rules for cash accounts, and it's easy to miscalculate and get the account restricted. Also, I've found it necessary to make sure there's at least 1% in free cash at the end of the day. Even if your TWS and your daily account statement shows you have a positive cash balance, if that amount is very small, some other overnight accounting factors (that they have never been able to explain to me) can flag the account as having overspent your available cash, and freeze it for further purchases for a few days. I encountered this difficulty once, never got an explanation, but since taking the above measure, have not encountered it again.