How much capital needed turn portfolio over each day ?

A

alientrading

Suppose you have a portfolio all tied up in stocks and it is worth 50k.

How much capital is needed to sell the whole portfolio at the open each day and buy a whole new portfolio worth 50k ? Each day you do this. ( You are turning the whole portfolio over each day ).

Is there some extra amount of capital required to do this to satisfy the settlement process ? Is there anyway to get around this requirement by using margin or day trading account ?

I have to think hedge funds have some way of getting around the settlement period.
 
Quote from alientrading:

Suppose you have a portfolio all tied up in stocks and it is worth 50k.

How much capital is needed to sell the whole portfolio at the open each day and buy a whole new portfolio worth 50k ? Each day you do this. ( You are turning the whole portfolio over each day ).

Is there some extra amount of capital required to do this to satisfy the settlement process ? Is there anyway to get around this requirement by using margin or day trading account ?

I have to think hedge funds have some way of getting around the settlement period.
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You can do whatever you want and trade however frequently you want if you have daytrading margin priveleges. 25k+ does qualify for that so it's a non-issue. You won't be able to trade that frequently unless you have daytrading margin priveleges.

If you are talking about a hedge 1 contract of equity futures would probably be able to hedge the portfolio.

If it's an IRA there is no daytrading allowed up to 4 times for every 90 day period before your account is restricted. 3 is the maximum allowable daytrades for any non-daytrading account. You can, however, apply for reg t margin with an ira and that will allow you to avoid waiting for a pending trade settlement so that you are able to buy today, sell tomorrow, but you can't do a buy, sell, buy in the same day.

You could do buy today, sell tomorrow, buy day after tomorrow, sell the next day ad infinitum with reg T margin in an IRA or a margin account without daytrading priveleges, which is another way to get around waiting for full settlement.
 
Thanks for the informative response. Looks like I will go with Margin account as I'll be trading mainly in IRA.

Quote from bwolinsky:

You can do whatever you want and trade however frequently you want if you have daytrading margin priveleges. 25k+ does qualify for that so it's a non-issue. You won't be able to trade that frequently unless you have daytrading margin priveleges.

If you are talking about a hedge 1 contract of equity futures would probably be able to hedge the portfolio.

If it's an IRA there is no daytrading allowed up to 4 times for every 90 day period before your account is restricted. 3 is the maximum allowable daytrades for any non-daytrading account. You can, however, apply for reg t margin with an ira and that will allow you to avoid waiting for a pending trade settlement so that you are able to buy today, sell tomorrow, but you can't do a buy, sell, buy in the same day.

You could do buy today, sell tomorrow, buy day after tomorrow, sell the next day ad infinitum with reg T margin in an IRA or a margin account without daytrading priveleges, which is another way to get around waiting for full settlement.
More...
 
Depends on the kind of account.

If you are at a prop firm you don't have to worry about settlements. If you have a Margin acct (retail 4:1) you can borrow against sale proceeds.

If you have a cash account (1:1) it would depend what you are trading - some things settle T+1, T+3 and some might still settle T+5 or T+7.

You can easily do the math. If you have $50k in a cash account and you sell all that you need is another $50k to re-purchase (so $100k acct, $50k would be invested and $50k would be cash used for new purchases).

Depending on what you buy and your broker (like leveraged ETFs are cash only some places so I'm not sure how those sale proceeds and/or margins are treated), if you assume T+3 you are looking at needing $100k on day one, another $50k on day two and then $50k for day three (could be wrong I forget when you actually see the money).

So you need $200k, enough to buy $50k three days in a row so that you can wait for sale proceeds to clear.
 
Quote from KINGOFSHORTS:

Margin not allowed in Ira account. They are restricted to a type 1 cash account.
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Reg-T margin for IRA's is allowed. It allows you not have to wait for settlement in stocks.
 
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