OPTIONS and the PDT RULE ? you don't need 25k to t
Post# of 194
Posted On: 05/27/2012 3:36:09 PM
OPTIONS and the PDT RULE ? you don't need 25k to trade options, the PDT rule applies to options when your using a " MARGIN " account only, if youre using a CASH ACCOUNT it does'nt fall in the PDT rules category which i RECOMMEND (read below for more info)
http://en.wikipedia.org/wiki/Pattern_day_trader
If you buy the same stock, at 3 different times in the same day, and close all of that same stock in one trade, that will be considered 3 day trades. If you buy in one trade and sell the position in 3 trades, that will be considered 1 day trade.[5] Three more day trades in the next 4 business days will freeze your account (you can only close existing positions) for 90 days, or until you get $25,000 cash into your account, whichever comes first. This also applies to options .
A FINRA (NASD) rule that applies to any customer who buys and sells a particular security in the same trading day (day trades), and does this four or more times in any five consecutive business day period; the rule applies to margin, but not to cash accounts . A pattern day trader is subject to special rules. The main rule is that in order to engage in pattern day trading you must maintain an equity balance of at least $25,000 in a margin account. The required minimum equity must be in the account prior to any daytrading activities. Three months must pass without a day trade for a person so classified to lose the restrictions imposed on them. Pursuant to NYSE 432, brokerage firms must maintain a daily record of required margin.
Not Defined for Cash Accounts
The Pattern Day Trading rule regulates the use of margin and is defined only for margin accounts. Cash accounts can not use margin, so there is no way to further restrict their use of margin, so there is no rule to classify them as engaging in Pattern Day Trading . They may still engage in day trading, even at a frequency that would classify a margin account as engaging in Pattern Day Trading, as long as this does not result in free riding, the selling of securities bought with unsettled funds before the funds have settled. Any instance of free-riding will cause a cash or margin account to be restricted for 90 days from purchasing securities with unsettled funds
Hope this info is usefull for some that are new to OPTION Trading
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