Hi everybody, I'm not new to investing but I'm not a very high frequency trader so I'm wondering some of the margin rules if someone would be so kind to explain. My questions have to do first with start of day trading buying power. If I'm day trading I realize you get up to 4x your intiial cash balance for trading purposes. Does this all have to be closed out by the end of day? For example, If I had 10,000 cash in my account ($40,000 day trading margin) and I made 4 trades of $10,000 each, is it possible to hold the last position I traded overnight? Or does all of the positions I traded have to be closed by the end of the day once I start using the extra day trading buying power? My next question is about buying and selling the same equity. Can I buy and short the same stock more than once in a day? For instance could I take 10 trades on an S&P 500 ETF going long and short many times as long as I have the buying power to do so? And lastly, when you are going long and short ETF's of indices like S&P 500 do I receive or have to pay dividends on anything? I'm not interested in dividends so I think that would complicate things if they were involved and if I go short I don't want to have to pay any dividends. Thanks for all responses! -schulzey
With $10,000, you can hold up to $40,000 worth of equities during the day (4:1 leverage), but you have to close most of it at the end of the day because you can only hold up to $20,000 overnight (2:1 leverage). This applies to both long and short positions. You can. Mind the PDT (pattern day trader) rules that limit your trades to 3 day trades per 5 business days. Once you cross $25,000 in cash balances, you are free to trade as often as you want. http://en.wikipedia.org/wiki/Pattern_day_trader If you hold a dividend-paying ETF overnight prior to ex-dividend, you will either receive the dividend (in long position) or pay the dividend (in short position). There is no way around it unless you trade a different instrument such as the S&P 500 mini futures or CFDs.
I'm familiar with the pattern day trader rules and I have more than $25,000 (that was just for a quick example). Now this is crazy and I wouldn't do it but just for example then, if I had $30,000 and I bought $120,000 worth of one stock, I can hold it over night as long as I sell $60,000 of it (or whatever my margin requirements are for regular overnight margin)? So is SSO, SDS, SPY, etc. ETF's dividend paying where I would have to worry about trading those? Thanks guys!! Sweet forum. Everyone is right to the point. -Schulzey