Restricting Stock Options to 3 daytrade limits was not part of the SEC daytrading regulation that went through the regulatory review and public comment process in 2001. The NASD suddenly started applying these restrictions to options in October. Applying these margin rule restrictions to non-marginable cash purchased options makes no sense at all! Voice your objections, both to the NASD who are applying these rules to options, and also to the SEC who did not approve their application to stock options. Write to pubcom@nasd.com and also ombuds@nasd.com as well as marketreg@sec.gov to let them hear your objections. The more public input they receive, the better. Use cc: and bc: to forward your letters to several destinations at once. They also appreciate it if you can include a phone number to reach you at. You're also welcome to join my little group to form a collective strategy of opposition to the daytrading restrictions www.groups.yahoo.com/group/DaytradersUnite/
i was on my way to build my account by trading options only. now it will take longer time maybe ssf will do the trick. hate to be pushed around by those bastards.
Yes the big players want to push the little guys out of the game. And yes those bastards want to push us around. That's why we have to make our objections heard, and not meekly accept their power to push us. They know they can get away with whatever they want as long as we remain silent. I do believe you can still daytrade options out of a cash-only account. I'm going to have two accounts now, one cash for trading options, the other margin for Single Stock Futures. And holding a position overnight before selling it isn't counted as a daytrade.
So you're only allowed to make 3 option daytrades per day? Does this mean if I buy 4 different options in the morning, then sell them in the afternoon, I've violated some rule? That's insane. Do you have a url to post that specifies the exact rule?
No! Not 3 per day. Three within any consecutive 5 days! Although I think if you trade out of a cash-only account you might be ok. I'll find out soon. www.nasdr.com/pdf-text/0126ntm.txt
If you traded those 3 options in one day, at my broker at least, you would not be able to buy any more stocks or options for the next 4 days. You would get a message saying you cannot make the purchase because you are a "potential pattern daytrader". And if you traded the 4 options on that day, your account would be marked as a pattern daytrader account. Which may or may not make some things even more difficult for you in the future.
what the f... the options schmucks just shot themselves in the foot again. granted, the little guys who are too small to be PDT's aren't much business for them, but in a market that is in danger of dying they're morons to ditch any business they can get...
Pitt is out. Small investors should be looked after right now! NASD and SECC should not establish rules to increase risks exposed to small investors but benefit big players and manipulators. Yeah, help decreasing market liquidity and trading freedom (which are backed up by sufficient cash). Day trading margin rules have no base on stock options. Small investor should not be limited to access the market in the way he or she feels mostly suitable. Protest!!!
Last updated on: 06/14/02 FROM NASD SITE. See question on OPTIONS below. Day Trading Margin Requirements: Know the Rules The new NASD day-trading margin rules took effect on September 28, 2001. We have received a number of questions from investors on how the new day-trading margin requirements operate. We are issuing this investor guidance to provide some basic information about these requirements and to respond to a number of frequently asked questions that we have received. We also encourage you to read the NASD and Federal Register notices about the rules. Summary of the Day-Trading Margin Requirements The rules adopt a new term "pattern day trader," which includes any margin customer that day trades (buys then sells or sells short then buys the same security on the same day) four or more times in five business days, provided the number of day trades are more than six percent of the customer's total trading activity for that same five-day period. Under the rules, a pattern day trader must maintain minimum equity of $25,000 on any day that the customer day trades. The required minimum equity must be in the account prior to any day-trading activities. If the account falls below the $25,000 requirement, the pattern day trader will not be permitted to day trade until the account is restored to the $25,000 minimum equity level. The rules permit a pattern day trader to trade up to four times the maintenance margin excess in the account as of the close of business of the previous day. If a pattern day trader exceeds the day-trading buying power limitation, the firm will issue a day-trading margin call to the pattern day trader. The pattern day trader will then have, at most, five business days to deposit funds to meet this day-trading margin call. Until the margin call is met, the day-trading account will be restricted to day-trading buying power of only two times maintenance margin excess based on the customer's daily total trading commitment. If the day-trading margin call is not met by the fifth business day, the account will be further restricted to trading only on a cash available basis for 90 days or until the call is met. In addition, the rules require that any funds used to meet the day-trading minimum equity requirement or to meet any day-trading margin calls remain in the patter day trader's account for two business days following the close of business on any day when the deposit is required. The rules also prohibit the use of cross-guarantees to meet any of the day-trading margin requirements. Frequently Asked Questions Why the change? The primary purpose of the day-trading margin rules is to require that certain levels of equity be deposited and maintained in day-trading accounts, and that these levels be sufficient to support the risks associated with day-trading activities. It was determined that the prior day-trading margin rules did not adequately address the risks inherent in certain patterns of day trading and had encouraged practices, such as the use of cross-guarantees, that did not require customers to demonstrate actual financial ability to engage in day trading. Most margin requirements are calculated based on a customer's securities positions at the end of the trading day. A customer who only day trades does not have a security position at the end of the day upon which a margin calculation would otherwise result in a margin call. Nevertheless, the same customer has generated financial risk throughout the day. The day-trading margin rules address this risk by imposing a margin requirement for day trading that is calculated based on a day trader's largest open position (in dollars) during the day, rather than on his or her open positions at the end of the day. Were investors given an opportunity to comment on the rules? The rules were approved by the NASD Regulation Board of Directors and then filed with the Securities and Exchange Commission (SEC). On February 18, 2000, the SEC published NASD's proposed rules for comment in the Federal Register. The SEC also published for comment substantially similar rule changes that were proposed by the New York Stock Exchange (NYSE). The SEC received over 250 comment letters in response to the publication of these rule changes. Both the NASD and NYSE filed with the SEC written responses to these comment letters. On February 27, 2001, the SEC approved both the NASD and NYSE day-trading margin rules. As noted above, the NASD rules became operational on September 28, 2001. Definitions What is a day trade? Day trading refers to buying then selling or selling short then buying the same security on the same day. Just purchasing a security, without selling it later that same day, would not be considered a day trade. Does the rule affect short sales? As with current margin rules, all short sales must be done in a margin account. If you sell short and then buy to cover on the same day, it is considered a day trade. Does the rule apply to day trading options? Yes. The day trading margin rule applies to day trading in any security, including options. What is a pattern day trader? You will be considered a pattern day trader if you trade 4 or more times in 5 business days and your day-trading activities are greater than 6 percent of your total trading activity for that same five-day period. Your brokerage firm also may designate you as a pattern day trader if it knows or has a reasonable basis to believe that you are a pattern day trader. For example, if the firm provided day trading training to you before opening your account, it could designate you as a pattern day trader.