how to get around the pattern day trading rule

Discussion in 'Trading' started by spinn, Dec 4, 2009.

  1. spinn


    I should of thought of this but think it works:

    I trade the SPY options...right now the underlying is at $110 or so

    this morning at 10 AM i shorted a 102 call at $10.15 just before the crash.

    towards the end of the day I wanted to short again so I shorted the $103 call again at $10.15.

    Since its 2 different strikes its not the same trade.

    you could do this for different strikes all day long. or buy different strikes.
  2. You are asking for trouble naked shorting.
  3. MX2101


    How would you have gotten out of them today?
    Do you mean you are selling calls to open? That is not wise if your account size is limited by the pattern day trader rule.

    Under 25 K you must swing trade, very carefully and with patience, unless you want to blow out.
  4. jalee25


    only a king would know... right... hehe.
  5. spinn


    I trade SPY with a $1 stop, entered with my broker.

    I guess if it were close to my stop one day and gapped open 100 points the next morning, I could lose a max of $200 or so, manageable with my account.

    I certainly would not do this with google or a volatile issue but to date i think i lot a max of $130 one time out of a few hundred trades.
  6. NKNY


    ? then your not short... your long, this is the only way you have pre- defined risk...

    Are you sure you didn't mean to say you went long a put...
  7. MX2101



    If they execute your stop the same day it will be considered a trade and can trigger the pattern day trading rule.

    You need to move past this scheme and build your account value above 25 K.

    Or trade ES.
  8. spinn


    no I shorted a call.....and out of 500 or so trades this year I lost 130 once and more than 100 maybe 3 times.

    how do you guys ever make a trade, or decide what to have for lunch?? when going to lunch you could get hit by a bus. struck by lightning, or attacked by a mountain lion

    most of my trades last 3-5 days but once in a while, like yesterday I am up a few points right away, and want to be able to exit
  9. I would agree with MX2102, that one with an account size of lower than 25Gs (just to take a break from the ubiquitous "k" for once) should explore futures trading, and be done with the whole issue of equities. I, for one, am incapable of swing trading and consider it far harder than day trading to pull off. Actually, I'm no good at predicting what's going to happen more than about 30 seconds from now. Happily, there are markets with enough volatility to offer good returns in such short time frames. I have no idea why the SEC adopted the pattern rule, as I think it tips the odds yet further against the retail trader. It's just one more obstacle to contend with. Far from protecting us from ourselves, it asks us to become psychic like all the wannabes on CNBC who purport to know the future. Of course all trading involves predicting the future, but just as it's easier to predict the weather 30 seconds into the future than 3 or 30 days, so it is with trading, at least for me. Coming back to the original topic, futures are a good bet for their superior liquidity, good bid/ask spread, and the 60/40 tax advantage. The last reason is my main one for using them. However, when my account was under 25 big ones, I traded in Canada, Japan, and Europe. With Interactive Brokers, you get to trade in all kinds of freakish jurisdictions and for pretty low commissions, albeit slightly higher than the US. (If the instrument is denominated in US$, however, the commission is the same as if it were a US instrument, which is dirt cheap.) As you may know, the SEC stays out of your business if you trade instruments listed on non-US exchanges. Thus, you can day trade to your heart's content with an account of any size.
  10. spinn


    thanks but I really like to keep my risk at 1% or so of my equity....with futures, that would be 10 ticks or so. I am no scalper, it doesnt fit my psychology at all.

    I made this post because not everyone has 25 gs....and this will allow them to get in and out a few times during the day if they want to pursue that style.
    #10     Dec 5, 2009