I day trade now with a cash account, and I have not had this problem. Is this part of the new SEC rule? Are you sure I will not be able to trade until the trades clear?
I started another thread that should answer this for you. http://www.elitetrader.com/vb/showthread.php?threadid=1775 -Jim
I'm so far removed from this issue being overseas that it is hard for me to keep up to date with what IB is planning to do. However, I am pretty certain accounts under 25K will not be restricted to option trading.
Just to re-iterate, if you have <$25k after September you have the following options: 1) Trade options unshackled of any Stalinist regulations 2) Trade futures on indices unshackled of any Stalinist regulations 3) Trade futures on stocks (to be introduced in December) 3) Join a professional firm if you want to trade stocks(you'll at least need a series 7, often other exams too) 4) Very selectively swing trade stocks through a broker... this is virtually impossible though ... if you are stopped out 3 times in any 5 day period, you will be designated as a 'pattern day trader' ... then you won't be able to trade for the next 90 days, unless you have more than $25k in your account 5) Swing trade stocks at will (without being subject to US regulations) by joining an overseas spreadbetting organisation (these are similar to the bucket shops that Jesse Livermore started his illustrious trading life in). A good one I have heard decent reports about is located at http://www.igindex.co.uk, but please look into this independently ... I am not quite sure what our tax status in trading through these spread betters is? The IRS may not regard the gains as tax free, even though the English tax authorities (amazingly) do.
Echotrade seem to be the savior of traders with less than $25k. TraderJim's post is copied below. Echotrade are likely to pick up a lot of business, given their speed and foresight: Have you guys seen this? I trade at ECHO http://www.echotradeonline.com/ they passed a memo around today that read the same as they now put up on the web. They just lowered the capital contribution for a new guy to $10,000. And you get 5 to 1 leverage, instead of the new 4 to 1 for all the other firms (and at the other firms it takes a min. of $25K to get the 4 to 1). "The minimum capital contribution for a trading member is currently $10,000 for 5 to 1 leverage, $25,000 for 10 to 1 leverage, $50,000 for 20-to-1 leverage and greater (depending on experience and hedging strategy)." The rest of the memo talked about how they are very comfortable with their risk controls and have the most advanced software, blah blah...so they could do this. What do you guys think about this? I don't know how I feel since I had to put up a lot more to join Echo, but I do have the advantage of using as much as 30 to 1 at times, so I guess it's ok for the guys like me still. -Jim
Im still confused about trading options on IB. Will I be able to open a "cash and options margin account" with less than 25K after the new rule takes effect?? If Im just using the account to trade options then it shouldnt be a problem right?
martyg, IB will probably rectify their account structure in view of the new regulation i.e. they will probably segregate options and stock trading, since there is no $25k minimum account requirement on options trading but there is a $25k minimum on stocks trading.
martyg, If under 25K, you should be able to trade options and futures at will. However, I believe you will be limited to the number of stock transactions during the 5 day period.
IB will most definitely not segregate options and stock trading. Lots of strategies depend on being able to hedge with stock and having to do that in separate accounts would create huge problems with margin and trade liquidation.
dlincke, Let me be more specific. I am not suggesting a physical segregation of options and stock accounts. I am merely suggesting a regulatory segregation of options and stock accounts, to enable someone with under $25k to trade options at will, even though he will be restricted from trading stocks at will after September. A regulatory segregation would obviously in no way make any difference to someone with over $25k who likes to do stock and option combos.