Pattern Day Trader

C

comp652

I’ve been using Scottrade for about a year, trading options for the most part.
Today I got a letter saying that I have been "designated as a pattern day trader as defined by NASD Conduct Rule 2520. That I must maintain a minimum of 25.000 in my margin account to do trade more than . . . etc.

Anyway I'm sure most of you know what this is about.

Could you please tell me what is going on here?
Will they close my account?
Couldn't I just stop now and stay with no more than four trades per five working days and everyone will be happy?

Please advice, this has never happened before.
I guess I have always traded less than what they designate as a pattern day trader, unknowingly though.

Thanks

Comp
 
You need 25k minimum in your account to day-trade equities.

Meaning, unless you are swing trading, you shouldn't be trading according to the US Gov.

Possible solutions:
1. Trade different equities and not the same one over and over

2. Join a prop firm, put 3 - 5k down and get buying power and avoid the PDT rule.

3. Accept it, live with it, tell scottrade you want to be noted as a non PDT again and they should allow you one more chance.


Hopefully you are not trying to day-trade, and if you are, leave Scottrade immediately.

EDIT: Sorry, just read you are trading options......


In that case, you are pretty much going to need to stop "day-trading" options. Don't know what else to tell you, you need 25k to day-trade. Or maybe you can find a prop-firm that does options.

But... tell them it was a mistake, and you want to be classified as a non day-trader again, they should let you off the hook.
 
.....................................

Could you please tell me what is going on here?
Will they close my account?
Couldn't I just stop now and stay with no more than four trades per five working days and everyone will be happy?
..................................................

Just call them tomorrow and tell them you didn't know about the rule and you'll be fine, just follow the pdt rule from now on.
 
Quote from JMowery1987:

......

Possible solutions:
1. Trade different equities and not the same one over and over

...............
More...

No. Not true. It doesnt matter the number of stks involved.
Its the number of trades.


....... rj
 
Quote from comp652:


Could you please tell me what is going on here?
Will they close my account?
Couldn't I just stop now and stay with no more than four trades per five working days and everyone will be happy?
More...
They won't close your account, but if you violate the PDT restriction your account will be limited to closing trades only until it either gets up to $25K or until 90 days has passed.

You can ask them (once) to remove the PDT designation from your account, and as long as you keep under 4 trades/5 days you can continue to trade.

A good overview is at http://www.interactivebrokers.com/en/trading/marginRequirements/patternDayTraders.php?ib_entity=llc . Their rules may slightly differ from your broker's, of course.
 
Update:
I called my broker (Scottrade) and asked them what happens if I were to continue trading with the same pattern I have been doing.
He told me I would loose my margin.
That's about all.
I can live with that. I don't use margin anyway when trading options.
He also told me that as long as I sell the day after I buy I'm OK.
Just don't sell what I buy in the same day.

Looks like iceman1 is the one to contact for support in what he is pursuing.
See this link:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=63741&perpage=6&pagenumber=1

Thanks for your advice

Comp
 
Hi comp,

You can sell in the same day as you buy, as long as it's a cash account.

The PDT applies to margin account only.

So for cash account,

You can trade more than 4 intraday round trips in 5 rolling days, as many as you want actually, as long as you do not use recyled funds from unsettled transactions, because it is cash account.
 
Quote from Li Ka Shing:

Hi comp,

You can sell in the same day as you buy, as long as it's a cash account.

The PDT applies to margin account only.

So for cash account,

You can trade more than 4 intraday round trips in 5 rolling days, as many as you want actually, as long as you do not use recyled funds from unsettled transactions, because it is cash account.
More...


Yeah true but you would have to have a big account to wait for trade + 3 settlement days. And his account obviously isn't huge (under $25,000).
 
You must log in or register to reply here.
Back
Top