How to maintain 4:1 leverage overnight?

W

wizardx

If I understand correctly, accounts tagged as pattern day traders have 4:1 buying power. However, at the end of each day, Regulation T says that you must have 50% margin, which means that your max leverage at the end of the day cannot be greater than 2:1. Therefore the broker will start liquidating your account near the close if you're above 2:1.

Is this how it works? IF yes, how can someone maintain 4:1 on overnight positions?
 
Quote from Ripley:

na...

You must have an account equity > 25K to get 4 to 1 margin. Or else, you only get 2 to 1 margin.
More...

Even then 4 to 1 is only intraday.
 
Yes, say the account does have > $25K equity.

I think there is still that Reg T. requirement at the end of the day that prevents you from holding 4:1 on overnight positions though.

Maybe someone who has held 4:1 overnight before, or someone from one of the brokerages, can jump in and clarify this.
 
Nothing more to clarify!

2:1 overnight
4:1 daytrading

Want more leverage, move to futures or get a series 7.

Why even bother to get into this crap business nowadays?



Quote from wizardx:

Yes, say the account does have > $25K equity.

I think there is still that Reg T. requirement at the end of the day that prevents you from holding 4:1 on overnight positions though.

Maybe someone who has held 4:1 overnight before, or someone from one of the brokerages, can jump in and clarify this.
More...
 
Quote from Ripley:

na...

You must have an account equity > 25K to get 4 to 1 margin. Or else, you only get 2 to 1 margin.
More...

Everyone's right about the overnight 2 to 1 margin and I know that was the original question, so it's been answered. However, if you are under 25K you CAN still daytrade with 4 to 1 margin. What you DON'T want to happen is to be classified as a "pattern day trader".

This happens if you make 4 day trades in a 5 business day period. If you keep from becoming a PDT, you are fine daytrading while your equity is under 25K. If you become a PDT, don't have 25K equity, and then daytrade, most brokers will have to close your account. There are no exceptions to this.

Also, brokers will not automatically liquidate you if hold the 4 to 1 overnight. You will just be subject to a Reg-T call. If you cannot meet this by the 5th day, you will then be liquidated and a restriction may placed on your account from online trading. Most firms are 90 days.

If you have daytraded and have overspent the 4 to 1, that's a day trade call. If you can't meet that call, you'll also be restricted. But for that restriction, you no longer have 4 to 1 margin for daytrading. You will only have 2 to 1, just as a normal purchase. But, you can only use the 2 to 1 ONE TIME during the day to day trade. When using 4 to 1 normal day trading buying power, the amount is calculated only on the highest amount you had open at any one time during the day. This can make a huge difference.

Hope this helps.
 
Quote from spreadgod:

Everyone's right about the overnight 2 to 1 margin and I know that was the original question, so it's been answered. However, if you are under 25K you CAN still daytrade with 4 to 1 margin. What you DON'T want to happen is to be classified as a "pattern day trader".

This happens if you make 4 day trades in a 5 business day period. If you keep from becoming a PDT, you are fine daytrading while your equity is under 25K.
More...

Correct me if I'm wrong, but in order to get 4:1 margin you need more than 25K, if your equity is below that you get only 2:1.
 
Quote from spreadgod:


Also, brokers will not liquidate you if hold the 4 to 1 overnight. You will just be subject to a day trade call. If you cannot meet this (by depositing funds) a restriction is placed on your account. Most firms are 90 days. After that, you no longer have 4 to 1 margin for daytrading. You will only have 2 to 1, just as a normal purchase. But, you can only use the 2 to 1 ONE TIME during the day to day trade. When using 4 to 1 normal day trading buying power, the amount is calculated only on the highest amount you had open at any one time during the day. This can make a huge difference.

Hope this helps.
More...

are you sure about this? say you have $50,000 equity and $200,000 in positions so you are at 4:1. At some point near the close, will the broker liquidate you so that you're at 2:1?
 
Quote from MTE:

Correct me if I'm wrong, but in order to get 4:1 margin you need more than 25K, if your equity is below that you get only 2:1.
More...

No, you can get 4 to 1 margin, as long as you're not a PDT. The 25K only applies to being a PDT.
 
Quote from wizardx:

are you sure about this? say you have $50,000 equity and $200,000 in positions so you are at 4:1. At some point near the close, will the broker liquidate you so that you're at 2:1?
More...

yeah, i just edited the last post. sorry about that. i was thinking about overspending the 4 to 1.
 
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