Pattern day trading various options...legal?

S

spinn

If I day trade options on the OIH.....does it violate the $25,000 day trading rule if I get in and out of different options?

If I get in and out of a 175 call...and then in and out of a 170 call.....does that count as two day trades or one day trade of two different things?

Since I am not trading the same option....I assume that as long as I dont get in and out of the same option three times in one day...I will be safe, correct?
 
i believe options are not under the SEC's PDT rule (at least at one point), however, some brokerages may put them there.

sorry to be so vague.
 
Actually...at least with Interactive Brokers....they are.

I have been shut down twice doing that.

I was dumb though and traded the same option.

Since OIH moves so much.....I should be able to daytrade the option....i may just switch the strike or expiry to get around that...hopefully.
 
i have a similar train of thought as i am currently developing a strategy to day trade options in a cash account.

perhaps for the sake of open discussion some legal type from the nasd or sec could chime in and clarify the need for options players with simplistic buy/sell strategies to be subject to 2520 when those deravities (not securities) must be paid for in cash. they could do this as part of "investor education".

my thinking on this is:

it would depend partially upon what type of account you have. if you have a margin account and trade options under it then you might be subject to 2520, however doing the same thing in a cash account should not be subject to 2520.

additionally, if you were simply buying and selling options without any complex strategies, then you are required to pay for all options in cash within 24 hours (cash in account). therefor you are not using margin and should not be subject to 2520.

if the bd attempts to force you to move from a cash account to a margin account, you still have to pay for the options in cash but not sure why compliance with 2520 would be necessary.
 
As much as OIH moves in a given day...and gaps overnight, I think daytrading options may be viable.

I dont want to hold this overnight.

I have next week off from my 9-5 and will see if I can make a few trades...on different strikes or expirys.

Of course I am really not worried about delta when I am only holding a few hours.

I will be aware of the deltas before entry and IBs trader workstation is excellent at reporting those.
 
I may be wrong but I thinking all equity options are included in the PDT rule. I know IB treats them as such.
 
Quote from TL Trader:

I may be wrong but I thinking all equity options are included in the PDT rule. I know IB treats them as such.
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If you have the capability of asking the nasd or sec to clarify in this thread that would be great as their rule seems to be left to interpretation by each bd.

Since IB subjects you to 2520 and its mandate, do they grant you margin priviledges of 4 to 1 when purchasing options? If they do then are they not in violation of CBOE rules which states all options must be paid for in cash? Or does IB apply 2520 selectively meaning only the parts they want to use? perhaps IB should respond.
 
Quote from spinn:

If I day trade options on the OIH.....does it violate the $25,000 day trading rule if I get in and out of different options?

If I get in and out of a 175 call...and then in and out of a 170 call.....does that count as two day trades or one day trade of two different things?

Since I am not trading the same option....I assume that as long as I dont get in and out of the same option three times in one day...I will be safe, correct?
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You can daytrade, even scalp options with any amount of money.

Be aware that the bid/ask spread is relatively large in options, due to their reduced liquidity/volume compared to the underlying stock; which is the reason why few people day-trade options.
 
Quote from crgarcia:

You can daytrade, even scalp options with any amount of money.

Be aware that the bid/ask spread is relatively large in options, due to their reduced liquidity/volume compared to the underlying stock; which is the reason why few people day-trade options.
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which brokers allows this, I know etrade treats options just like equities and theres the 25,000 rule to day trade them
 
I believe it depends on the type of account you have and again who your broker is. The fact that you pay cash for vanilla puts and calls brings up an interesting point as I think the intent of regulation T was to limit retail trading activity. That is you can't have 4 trades in a 5 day period, 3 is ok though. duh!
 
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