Pattern Day Trading options no problem at OptionsXpress

Discussion in 'Trading' started by nusrat, Oct 18, 2002.

  1. nusrat

    nusrat

    Copied from IB's boards . . .

    Posted Friday, October 18, 2002 02:51 pm by "Switching-Back":
    --------------------------------------------------------------------------------
    No PDT rules for options.
    That's what they told me today.
    http://www.optionsxpress.com
    $1.50 per contract, minimum $14.95.
    And better Analytics, screens, Strategy Scan,
    etc., compared to IB.
    Favorably reviewed by Barron's, TASC, etc.
    MUCH better support/service than IB; I used O-X
    for six months, and their chat people are
    genuinely helpful, interested, informed, and
    sympathetic to the customer's concerns.
    If you trade in enough size, they might even
    negotiate rates.

    Posted Friday, October 18, 2002 06:07 pm by "hii":
    --------------------------------------------------------------------------------
    I've been happy with IB, and I really think, at least for now, that something unintended took place to change the daytrading options rule. I know that on October 7 I did three "day trades" as before with no problem.
    And I specifically chose IB because their commission was so simple, just $1, no minimium $15. But if this day trading thing is not resolved it may end up being worth checking out one of these other brokers, even if I end up paying $15 commissions for fewer than 15 contracts, if it means not having this 3 trades restriction.
    Thanks for the link.

    Posted Friday, October 18, 2002 - 06:12 pm by "hii":
    --------------------------------------------------------------------------------
    Funny! They have an "active-trader" discount on commissions at OptionsExpress. They reward you for doing more trades, rather than punish!
     
  2. I am guessing the reason why OX says no PDT rule is that you are not opening a stock margin account. IB has you trade options from a stock margin account and the NASD + NYSE forces the brokers to apply the PDT rule (in the stock margin account) to your option trades.

    That being said, what kind of account is OX having you trade from?
     
  3. Can you trade options from a cash account? If yes, that may be how they get around the PDT rule, but then the freeriding can of worms pops open, with the 3-day settlement etc.
     
  4. I guess that yes you can do that. For course, OX can never offer options and stocks together because of that.
     
  5. marketsurfer

    marketsurfer Vendor

    one can only trade options in a cash account--- this is not say that you can not trade them with a margin account, but you cannot trade options with margin--you need the cash to cover the transaction.

    best,

    surf:)
     
  6. True but if you trade options within the context of a stock margin account (as it is done in most places), your broker will use your options trades to apply the PDT rule to your stock account even though you are buying the options with cash and not on margin.
     
  7. nusrat

    nusrat

    Here's the confirmation I received from O-X today.
    Of course, I'm sure someone will say that I'm secretly connected to O-X and I fabricated the whole thing . . .

    -----Original Message-----
    Sent: Thursday, October 17, 2002 9:01 PM
    To: OptionsXpress
    Subject: NASD jurisdiction issues

    According to NASD, it regulates NASDAQ and "also regulates
    transactions executed and reported to Nasdaq by NASD member
    firms in securities listed on the New York Stock Exchange (NYSE)
    and Amex."

    I could ask NASD these questions, but I'd like your firm's interpretation.

    1. Are AMEX-listed equity options reported to Nasdaq?

    2. Are AMEX-listed equity options subject to Pattern Day Trading restrictions?

    3. Does NASD have jurisdiction over transactions executed at CBOE or ISE?

    4. Do NASD's Pattern Day Trading restrictions apply to equity options at CBOE or ISE?

    Thank you.

    ----- Original Message -----
    Sent: Friday, October 18, 2002 2:10 PM
    Subject: RE: NASD jurisdiction issues

    I will attempt to briefly answer your questions.

    1. No. NASDAQ is an exchange, AMEX is an exchange, NASD is a regulatory body totally separate from both.

    2. No, but AMEX listed equity options are subject to NASD rules that apply to the broker dealers who offer the AMEX products and also subject to margin rules like day trading if the NASD chooses to apply day trading to options (currently that application of day-trading to options hasn't been reached in the rules, interpretations vary and are made at the exchange level).

    3. Yes. NASD is a regulatory body that has jurisdiction over its brokers who execute there. Their jurisdiction is over the brokers, not the exchanges though.

    4. Not really, for the same reason as no. 2.
     
  8. nusrat

    nusrat

    O-X also told me today that they can now trade spreads
    completely automatically (no manual intervention on the floor)
    at ISE *and* CBOE . . .
    [I've munged the email addresses to foil spammers.]

    ----- Original Message -----
    To: OptionsXpress Customers
    Sent: Friday, October 18, 2002 12:56 PM
    Subject: Important Notice to OptionsXpress Customers

    Dear customer,

    [snip]
    We will be able to offer you more products, such as:

    * New Bond page with inventory
    * New Option Spread page
    * FDIC insured Money Market fund
    * Increased excess SIPC protection
    * Stronger stock presence
    * Online monthly statements
    * optionsXpress online confirms
    * Expanded Mutual Fund supermarket
    * Online financial planning tools

    ----- Original Message -----
    To: [optionsxpress.com]
    Sent: Friday, October 18, 2002 2:21 PM
    Subject: Re: Important Notice to OptionsXpress Customers

    > * New Option Spread page

    Does this mean that we'll now be able to trade spreads
    electronically on ISE (versus manually)?

    ----- Original Message -----
    From: [optionsxpress.com]
    Sent: Friday, October 18, 2002 2:47 PM
    Subject: RE: Important Notice to OptionsXpress Customers

    Yes and the CBOE.
    Ned

    ----- Original Message -----
    To: [optionsxpress.com]
    Sent: Friday, October 18, 2002 2:56 PM
    Subject: Re: Important Notice to OptionsXpress Customers

    sorry, I wasn't very clear in phrasing my question.
    CBOE spreads are traded only by hand, I believe;
    the delays are the reason why I stopped trading
    spreads at OX.
    ISE is all automatic.
    Will *that* be available?

    ----- Original Message -----
    From: [optionsxpress.com]
    Sent: Friday, October 18, 2002 3:00 PM
    Subject: RE: Important Notice to OptionsXpress Customers

    Yes, and auto at the CBOE, too. (brand new)
     
  9. nusrat

    nusrat

    "I am guessing the reason why OX says no PDT rule is that you are not opening a stock margin account. IB has you trade options from a stock margin account . . . OX can never offer options and stocks together because of that."
    If IB wanted to badly enough, they could segregate the accounts. Re-read the new version of IB's PDT/Margin announcements; I don't think they mention any exceptions by account-type.

    "That being said, what kind of account is OX having you trade from?"
    Mine is a stock + options acct. I rarely trade stocks, and never on margin, but that's besides the point: O-X's response to my question didn't make a distinction.
     
  10. I believe options settle same day, no +3.... thus no free-riding.
     
    #10     Oct 18, 2002