The problem to apply PDT rules on stock options is so fundamentally and technically wrong enough to destroy the principles of this financial instrument. Since stock options have a very important component of time value as futures have, how can any rule restrict the freedom to go in and out a position. This is very clear in "Characteristics and Risks of Standardized Options" that no reasons like PDT rules should give liquidity risks. Before they can get earlier document changed, they should not make PDT rules effective on stock options. Another problem is that PDT rules is supposed to solve issues of margin transactions to protect brokers. It should not apply to non-marginable transactions like buying stock options. The rules does not work on stock options as they are supposed to, except NASD has other concerns for other interests which they didn't legally state in the process and the documents of passing the rules. Options traders are already in a risky business and cannot afford this kind of ridiculous rules to stack on their heads. I am writing my thinking and hope for your understanding. I know my English is awful. It would be more helpful for others here to understand me and write to NASD/SEC etc. as many times as possible, as often as possible. Thanks.
qdz, Fair enough, and I wish you well in your endeavors to change the PDT rules, and to prevent them from being applied to other financial instruments. There's no question that they don't give the little guy a fair chance to learn and play at this game, and it would be a tough nut to work around. But there are methods, whether it's trading the eminis or going prop. Or simply, as you suggested, making full use of your 3 day trades, swingtrading the rest, and slowly building up your account. Good luck.
I strongly recommend not to make full use of three daytrades. They must be saved as supply for emergency situations. When you use all three daytrades, you will be prohibited from opening any new positions until the five day period has passed. You are not allowed three per week. It's three per five consecutive days. If you make three daytrades on wednesday, you will not be able to open any new positions until the following wednesday. Your daytrade count will not reset on monday just because a new week has started. You really don't ever want to use your third daytrade. Using it will prevent you being able to open any new positions for the next 1 - 4 days. Don't think that just because it's friday and you still have 2 daytrades left in your account that you can make two daytrades before the weekend and not have to worry about it. If the first daytrade was made after monday of this week, you will not be able to open any positions next monday if you use the last 2 daytrades on friday.
While I agree that the PDT is harmful to small investors and that the government has no right to tell me how I can use my money, I think you need to develop a better understanding of why the rule is in place. The PDT was not put in place to hurt small traders it is there to protect them. They looked at several studies done a couple of years ago showing that 90% of daytraders lose money and decided the public needed to be protected from themselves. The SEC, in all its infinite wisdom knows of only one way to distinguish between a sophisticated investor and the dumb public, that is by the size of their bank account. They look at daytrading as a high risk investment along the same lines as private stock offerings and hedge funds, they have historically used financial qualifications to determine suitability for these types of investments. While most traders realize these assumptions are BS, you need to find a way to show that short term trading is beneficial to the small term investor. The SEC has been presented evidence that 90% of daytraders lose, and until you can refute this argument, ranting and raving is only going to hurt your cause. Good luck in your fight.
Elite Trader Goes Bonkers Elite Trader Forum member qdz reportedly has barricaded himself in the Montana State Child Welfare Office early this morning in protest of what he calls the unfair Pattern Day Trader rule. When informed by Montana State Police that the Child Welfare Agency had nothing to do with the PDT, the distraught wannabe trader shouted from the 7th floor window: âdetails, details â you gotta start somewhere if you want to change the corrupt and unconstitutional rule that is keeping me from becoming a billionaireâ. Waving a tattered copy of the of the United States Constitution in one hand, and a photocopy of a recent brokerage statement showing a balance of $153.28 in the other, the near crazed qdz sighted the 1st, 3rd, 5th, 6th, 9th, 14th, and 22nd Amendments as clear proof of his right as a citizen to trade along side of the big boys. In a tearful exclusive interview, qdz told this reporter how only yesterday he could have made some $513,254.39 after standard IB commissions, trading WMT stock, if only the Federal Government, The SEC, FDIC, and Trilateral Commission had not jointly conspired against him. qdz vowed to carry his fight to the Vermont State Fish and Wildlife Authority if necessary, and said: âI ainât never gonna quit. Iâm doing this for all the little guys who are systematically being kept from partaking in the free marketsâ. An unruly crowd of 3 supporters gathered at street level in a show of support for what some have called a lost cause.
Magna, thank you. Hii, you are right do not use up all day trades unless you see enough award/risk. Here is an example of record I keep. Day trade are for high profitable-taking/loss-cutting. Always keep 1 day trades available for the next day. Any better scheduling? Date: day trade and counter M DT 1 TU W DT 2 TH F M DT 3 TU 2 W DT 3 TH 2 F M DT 3 TU 2 W DT 3 TH 2 F Yes, we swing trade and save commissions. Another tip is that keep some full hedged positions by the end of the day. IMO, this not only saves commissions but also gives me two chances to swing the next day. That is you can close the positions and open them in the next day. But these are not day trades. If I accidentally tips the bastards who want to continue to screw us small investor by enforcing further unfair rules, I am going to retaliate. As for brokers, I really have sympathy to them. After all they earn much less for sure.
I use to trade with 2-5k when I first started learning how to trade stocks. I agree it's REALLY BAD they had to pass the PDT rule which limits accounts under 25k because those are the accounts learning how to trade. But since it's done, people need to focus on how to work around it rather than complaining or wasting time posting about it. If anyone really had the passion to trade, they would do what it takes. There are different options. 1. Wait for a good setup and Position trade with the 3 trades allowed. 2. Switch to futures which allow unlimited trades with 2k min. 3. Work a full time job saving up money and studying trading on the side. Switch into trading when enough money is saved and have a trading plan. The losers that fail would just blame the PDT rule for their own failure or the market for not going as expected. Posting on message boards how brokers are unfair. How these rules screwed them and that's why they aren't winning. Winners takes responsibilities for their losses. Losers displace them on anything they can. In Trading, all success or failure lies within the Trader.
Thanks JORGE. Nice comedy. Thanks very much for the suggestion and reminder. All of you said is correct. I am a loser and probably will be for a while, no doubt about that. I was easily pissed off by some sudden rule changes imposed by irresponsible brokers without notification. I underestimate what the risk and cost associated with change of trading style. Ultimately, it is my own fault and responsibility. I want to share my story with you. Meanwhile, I surely want to bash PDT rules and IB to have some psychological balance. I have to let the rage out in some sort of relatively harmless way. If not, I may do something even more silly. Good lessons to a loser. Thanks.
Umm Guys, The PDT rule re: futures is not enforced because there is supposed to be higher suitability standards with anyone wishing to trade in futures...same thing w/ Options.....When I was approving options trading for an account, I would only approve for buying Calls/puts and covered call writing unless they signed a new account card stating they had a MIN of 250K net worth and were LIQUID for 50k...I think that is where the PDT rules need to be adjusted...I believe that a trader with 10k liquid , no income and less then a year experience should not be daytrading...likewise a trader who puts up 5k, but signs a statement attesting to 3 years experience, 50k liquid and net worth of 200k should be allowed to....i think there's a better chance of that happening then eliminating the pdt rules.