Mgregor is pretty much correct regarding the daytrading rule. However, it should be pointed out that this trading call occurs in this situation <b>only</b> if you attempt to trade the following day using more buying power than you would have minus the value of the overnight position. So for instance, in a $50,000 account, if you were to take home $25,000 worth of MSFT and sell it the next day, you lose $25,000 worth of buying power for that day in MSFT only. You could still daytrade up to $50,000 worth of MSFT ($25,000 in cash plus margin). However, if you tried to daytrade more than $50,000 worth of MSFT you would get hit with the margin call. You would of course still have your full $100,000 worth of buying power to trade any other stock besides MSFT.
So, as I understand it, if I buy 25k worth of MSFT and sell the next morning for 30k, I can not include the 5k profit to trade that day. After selling MSFT, the Buying Power remains the same as the moment MSFT was bought, because a broker will not front profits. Sounds like this rule is to keep traders from trying to use 100% of their buying power. No problem for me. It got me thinking though, thanks.
Jeffrey - That is not what I think they are saying. Its not just the $5000 profit in your example, but the full $30,000 that they will not let you use if it is in the same stock which is sold that day. You need additional buying power (say in the form of margin) to repurchase the same amount of the original stock. I think? this is what everyone is saying. Is this correct folks?
steven9 is correct. Whatever money comes from the sale of an overnight position, whether it includes a profit, loss, or break even is unavailable in its entirety to use for daytrading in that same stock. Of course you can still use your entire buying power, including whatever profits you may have made from the overnight position, to daytrade any other stocks besides the one you held the overnight position in.
The new proposed margin rules will change the definition of a day trade which currently includes the closing of an overnight position and a re-initiation of another position in the same stock. Consequently, such transactions currently have the possibility of triggering a Reg. T margin call. The new rules will logically treat the subsequent transaction as an entirely new transaction.