Want to discuss any of these...?? Initial Margin Option margin Buying Power Excess capital Maintenance Requirement Reg-T Equity call Margin Call the elusive SMA Day trading Let the fun begin...
I posted this in the IB thread but perhaps you didn't get a chance to see it yet,so i'll post it again...say you have $20,000 cash in a MARGIN account,how often would you be able to trade that (i'm assuming you would be allowed only up to 2 to 1 leverage for day or position trades since it is below 25k)?I think someone else mentioned i would be able to trade it no more than 3 times during a 5 day period.Is that true?
If you have 20,000 in a margin account... You do not have the mnimum equity to be a "day trader" (25K) So, to remain without penalties or restrictions you would only be allowed to trade 3 times in 5 days. The forth trade would put you into a day trading "equity call." And your account would be labeled a day trading account. If you deposited monies to this account to bring you to the 25K mark you would then get 4-1 margin If you did not meet the call, your account will become restricted. Cash only for 90 days.
that's interesting about the 4:1 margin. I don't use stock margin much, preferring to use options when I want leverage, but I had always thought that the minimum initial margin was 50% and maintenance was 30%. Has that gone away if you are over $25,000 ?
Now when you say 3 times in 5 days,does this mean i can use 2 to 1 leverage on my 20k giving me 40k worth of buying power and being able to initiate and liquidate three 40k positions over the 5 day period? Basically,am i able to buy and sell 3 times during a 5 day period 1000 shares of a $40 stock with my 20k?
Yes, for pattern day traders, intraday margin is 4:1. (Report is one broker is offering 4:1 for overnight aswell.)
The rule is you can make 3 "daytrades" in a 5 day period. A daytrade is one buy and one sell in the same day. (or one sell and one buy)
No way it has not gone away... it has blossumed into one huge headache for most people. 4-1 is an Intraday buying power, and not an overnight buying power. By the end of day the day trader must reduce the amount spent from his intraday buying power to his regular buying power. (The 2-1 number) And the maintenace (.3), which is calculated overnight. Is also still in existence.
Also worth noting.... If you buy 500 shares Then buy another 500 shares... Then sell 1000 shares... That is 2 daytrades.
Personally,i think the PDT rule is a dumb rule that benefits no one.Why should someone that has 25k in his account be able to do an unlimited number of daytrades,while someone with a margin account that doesn't have 25k is limited to 3 trades over 5 days.Thank god for the pro firms that let one daytrade with much less than 25k and with like 10 to 1 leverage.