One thing that has not been mentioned regarding a cash account is that you can only invest your account balance ONE TIME. So if you have a $2,000 account and you daytrade Four $500 option trades you are DONE for the day.
That's unfortunately true, is caused by the "settlement time" of proceeds from trades, the famous T+2 (or is it T+1 ?) rule. IMO this stupid rule needs to get scrapped, as it's not necessary nowadays. But with a margin account you cannot do even 1 daytrade if your contingent is fully used, ie. the margin rule that says "2 daytrades in 4 days" or so... not sure, maybe 3 daytrades in 4 days for small accounts < $25k.
3 Trades in a rolling 5 day period for a regular margin account. In a Cash account if you sell an option that was made in a prior day the proceeds are immediately available to reinvest.
Regarding T+2 settlement rule: it applies to margin accounts! : https://www.schwab.com/learn/story/stock-settlement-why-you-need-to-understand-t2-timeline Not sure yet whether it applies to stock trades only, or also to option trades.
Over the years I have changed my account status with TDA many times between three classifications: Regular Margin, Cash Account, and PDT. I use the regular margin when I want to do option spreads, iron condors etc. PDT of course when day trading stocks and a cash account (under 25 K) when I have wanted to trade directional options (calls and puts) with the option to bail if I feel the need without having to worry about the day trade count. As I stated the proceeds have always been available immediately to reinvest if the option was purchased in a prior day so unless there has been a regulation change in the last few years that should still be the case.
In fact, I got caught on June 28th having just bought calls before the market started to drop fast. I bought puts to counter my positions but could not exit the calls until the next day. This conversation has reminded me of the advantage of a cash account so I think I will change back. First I will message TDA just to be sure that is still the case on the immediate availability of funds for reinvestment on positions held a day or longer.
I communicated with TDA and this is the way a Cash Account works with Options 1. Settlement for Option Trades is one day. 2. Thus if you can you can day-trade your settled cash up to the extent of your account value. For example in a $5,000 account you could do 10 DayTrades of $500 each so the term "unlimited day trades" is misleading. 3. With one day settlement you can do it all over again the next day. 4. If you hold an option overnight you can sell it and buy another option but you cannot daytrade the option you just bought because proceeds from the sale is not settled until the next day.
I don't think any US broker allows option spreads in a cash account, and that's a deal breaker for most option traders. A cash account simply doesn't offer the range of strategies that most experienced option traders want to use.