<I>Quote from hii a_ooiioo_a</I> I wasnât aware of that. I was under the impression that as long as you had $25,000 (cash and securities) in your account you were not limited to the number of trades. When my IB account is over 25K (mostly stocks and less than 5K cash) it shows the number of daytrades as unlimited. When it is under it starts with 3 and works down. For a while I was on the edge and the number of daytrades moved from 3 to unlimited during the day as the market and the value of my account fluctuated. I have never tried to make a trade when I have reached zero. I donât know if IB wouldnât take the trade or if I just wouldnât be able to close it out the same day. I donât trade options so am unaware of the PDT rules pertaining to them.
OF course you will be subject to the PDT rules. stock options are NOT a security....they are only valuable and count as equity after you submit orders to the clearing firm to exercise those options.....HI....you should grab a series 7 book off the classifieds here and read up....seriously, i believe it would help you understand accounting and other rules in the brokerage industry....Im serious about that too....if this is your career it's very important to know the rules ......you would not pull apart you car engine and then ask somebody what the rods do would you?
A lot of firms require 30 K minimum because they don't want to mess with people that can easily drop below 25k. Some firms close your account immediately once you over trade.
I can't believe there are still so many ignorant people f8cking around without reading the official explanation that NASD/SEC gave for the PDT rules. So I believe there is a great deal of necessity to continue this discussion as long as it takes until they idiots understand the thing. Don't thank me. I will do the hard work to turn idiots into geniuses.
Don't take this the wrong way.....but you calling people idiots is kind of like Iraq heading the UN disarmament conference!!!! The only ignorant person is you...Like I told your PDT Buddy HI....Get a series 7 book and read it....there are MANY rules and regulations that apply that you don't know about . There is also a thing called HOUSE RULES which permits a firm to have stricter policies and procedures....for instance, I would never approve an account to trade options unless they could show me substantial experience and liquid net worth. The PDT are NOT by any stretch the only rule you need to learn...trust me, get a securities manual and start reading...this is your life so you might as well KNOW not only the rules , but in many cases the REASONS behind them.
Is it irony or merely absurdity that the Securities Exchange Commission should subject the NON-MARGINABLE stock options to the Pattern Daytrading Margin rules, when apparently stock options aren't even securities? Now, it's one thing if you want to say that options are non-marginable, that purchasing an options is seen in accounting as if you had simply withdrawn the cash you spent on the options from the account entirely. So if they want to say that the options I purchased do not count toward my account's margin value, and thus if my options purchases brings the marginable account value below $25,000 then the rest of the account should be subject to the PDT limitations. But, if as you say, options are NOT securities at all, and my money spent on options for all purposes amounts to a cash withdrawal from my account, then what conceivable business does the S.E.C. have telling me how many times I can trade options??? If they ain't securities, and the money spent on them is considered essentially a cash withdrawal, the S.E.C. has no place sitting there telling me how many options trades I can make. So, Middle Finger to you S.E.C.! Screw you and your meddling PDT crap. I'm in the Futures game now, and well rid of crappy options and stocks too for that matter. p.s. My account was up 33% today from yesterday on NQ Futures. Middle Finger, S.E.C.!!!
Thank you for the explanation, hii. I feel much better now for that there is smart and nice people like you in this world.
....Are you two out of your mind??? All an OPTION gives you is the RIGHT to purchase stock at a certain price before a certain time.....the reason it's regulated is because if it wasn't...1) firms wouldn't honor their obligation 2) you would be charged HUGE commissions and 3) you could be sold options on securities that don't exist.. Im going to say this one last time and then I promise I won't say it again: GET A SERIES 7 BOOK and start reading not only the RULES but the RATIONALE behind the rules....Im not saying the SEC is perfect but their often is a method to the madness......for instance, you and other traders should really take a look at the 5% commission guideline....I'll bet you are often charged more then the 5% guideline on partials........
I'm not saying that options shouldn't be regulated by the S.E.C. What I am saying (pay close attention, and read this carefully several times if necessary) is that the S.E.C. should not be telling me how often and in what timeframe I can trade options. They do this when they subject options to the Day Trading Margin rule that was designed to govern brokers' lending habits to stock traders who trade on margin. The options I buy have no margin value, I do not use any margin to buy them, the broker is not lending me any margin. Yet the S.E.C. tells me I cannot sell one the same day I buy it more than 3 times within any 5 trading day period. Which is particularly heinous with options, because not only do they not use margin as just stated, but options are subject to constant Time Decay, which means prohibiting me from selling an option on the same day I buy it can be lethal to my account. If I have to hold them overnight, they will generally lose value even if the underlying stock remains at the same price. And if the stock takes a turn the wrong way the next morning, I do not have the luxury of waiting for the stock to head back up to where it was, because that may be a week away or who knows, and by that time the option could have lost half its value or more just through time decay. If they're going to subject the options themselves to PDT limitations, then they should include options value in calculating account value so a million dollar account doesn't have to be clamped with the PDT rules. If they're going to insist that options value cannot count toward account value (because they aren't securities, Series 7, etc. . .) then they should let me trade the damn non-marginy non-securitish options without their arbitrary restrictions. As I said before: if they want to say the purchase price of options is deducted from my account's margin value, so that if the non-option portion of the account falls below $25,000 then my trading of stocks will be subject to the daytrading restrictions, so be it. I would have to accept that purchasing options would have that effect on my ability to freely trade stocks. But that in no way justifies extending those same daytrading restrictions to the options themselves, whose non-margined purchase put the rest of the account in that condition. Thank you for your time and attention. I have tried to make this as clear as possible, I hope you will come to grasp my point.