Options take one day to settle. You can round trip trade with settled funds on the cash side of your account.
That is in a cash account. In a margin account, BP cycles after you DT but only to beginning of day BP.
Fidelity gives you an option to send an order (in the drop-down window).... via cash... or margin.... in the same account. The cash side of the account settles the next day. Not sure about other brokers work though.
What is the advantage to the customer to choose CASH? If you choose MARGIN, you don't have to wait and a DT is not borrowing. Interesting that they provide a choice. I'm just not aware of any advantage.
BTW, each margin account approved for shorting has 3 accounts. Type1=CASH Type2=Long stock, long and short options Type3=Short stock Most margin accounts move the cash into the margin account. Interesting that they let you trade in account type 1 or 2.
Well... The advantage is you are not restricted by the PTD rule. You can basically round trip trade options with the settled cash in your account as much as you like. Say you have 20K.... you can RT trade 3 $4000 deals and the next day RT trade an 8K deal. The next day you can RT trade another 12K. No restrictions.
I did not know that. Thank you! Does this rule change apply to cash accounts? Day trading in a cash account is generally prohibited. Day trades can occur in a cash account only to the extent the trades do not violate the free-riding prohibition of Federal Reserve Board's Regulation T. In general, failing to pay for a security before you sell the security in a cash account violates the free-riding prohibition. If you free-ride, your broker is required to place a 90-day freeze on the account. Bob
Here's the drop down option. They don't consider it (at least Fidelity doesn't) a free ride if the funds are settled.
Its still a bit restrictive, but its a way to work around that BS rule. (that was instated to protect ourselves from ourselves) (Long live the nanny state) Better just to have 25K.