As I understand it, if I have a cash account and not a margin account there is no limit to the amount of round trip OPTIONS trades I can make in week. Is this correct? I am planning to open an account with <5k and my trade plan usually calls for 4-5 round trip trades a day. I never hold overnight. Appreciate all feedback, ok to assume I know very little. In the past I have used options only for swing trades. thank you
https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations Good explanation of free riding violations. I know here in Canada, atleast with any brokerage here we don’t have that rule. We’re allowed to use unsettled funds to purchase more. If your a U.S resident it’s something to be aware of. Everything seems to mention stocks but I believe it pertains to options. Other issue is ( if it’s anything like my cash accounts like my RRSP account) you can’t sell any options since that requires margin. In my registered account I can buy calls, buy puts and sell covered calls. This might just be a Canadian registered account rule but believe it’s a cash account thing as well. Same as you can’t short stocks in a cash account. I’d recommend asking your broker.
Unless you are making very small trades your plan is not going to work. You have to realize what trading a cash account means. Whenever you close a cash option position the money does not appear in your account immediately like it does with a margin account. For options the rule is T + 1. Funds do not settle until the next day after a trade and are not actually in your account until the 2nd day. Close a position on Monday. Funds from your trade will be in your account to trade again on Wed. - https://www.ally.com/do-it-right/investing/what-are-unsettled-funds/ It is a Yuck rule for options. However, in the distant past options were traded like stocks and you did not have to settle your trade for several days. Some people would put on an options trade and if it didn't work out they would just walk away. Must have been nice.
Depends on how much you are trading but yes, based on what you wrote so far it will definitely work. There are no daytrading restrictions but any closed trades will settle the next day.
This is incorrect. Funds are available for trading the very next day after you close out an option position in a cash account.
ok thank you for the reply - so if this is true - if I make an "ALL IN" intraday options trade with my cash account that I close out before / at market close, funds will be available at next day market open but NOT available for another same day trade. in this case, the difference between a cash account and a margin account would be that my funds are a 'silver bullet' since I cannot make 2 same day ALL IN trades. is all of that true?
Correct. However if you are not making all in trades you can trade as much as you want as long as the cash is available. Whereas, in the margin you are restricted by the PDT rules