Trade Date + plus 3

B

BladeTrader

Hey everyone...great site this seems to be...

I need to run something by all of you regarding the trade date + 3 regulation.

I have moderate day-trading and short term swing trading experience, but NO experience when it comes to cash accounts/IRA's.

I'm helping my father with his IRA. He currently has an account at CyberTrader and one account at Scottrade (retail, not Elite). Remember, these are CASH accounts, for an IRA.

A particular strategy we want to employ requires that we buy stocks from a given stock screen on Monday at the market open and sell them 4 days later at Friday's close. Then, on the following Monday, we want to reinvest the proceeds the following Monday and hold it through the next Friday like so. Does this make sense?

Well, CyberTrader will not let you do this. They require 3 days settlement on the proceeds of the stock we'd have sold on Friday, so we cannot buy the next Monday, but have to wait until Wednesday. Does THIS make sense?

I called around other brokers, IB, MB, and TradeStation and they all treat cash accounts the same way. They will NOT let you trade with proceeds from the previous day's sale.

BUT, Scottrade will let us trade this way in the cash account. Scottrade still abides by the Trade date + 3 regulation but it seems more leniant. They will let us sell the stocks on Friday and use the proceeds to buy new stock on the following Monday with the warning that if we sell this newly stock before 3 days have passed that it will THEN and only then be a free ride violation.

So, with those details in hand, I need to know is this just a unique benefit of Scottrade or are there other firms out there (with lower commissions) that are flexible in this regard? Again, keep in mind that this is cash-only, IRA account.

Thanks.
 
Quote from Stecchino:

Hey everyone...great site this seems to be...

I need to run something by all of you regarding the trade date + 3 regulation.

I have moderate day-trading and short term swing trading experience, but NO experience when it comes to cash accounts/IRA's.

I'm helping my father with his IRA. He currently has an account at CyberTrader and one account at Scottrade (retail, not Elite). Remember, these are CASH accounts, for an IRA.

A particular strategy we want to employ requires that we buy stocks from a given stock screen on Monday at the market open and sell them 4 days later at Friday's close. Then, on the following Monday, we want to reinvest the proceeds the following Monday and hold it through the next Friday like so. Does this make sense?

Well, CyberTrader will not let you do this. They require 3 days settlement on the proceeds of the stock we'd have sold on Friday, so we cannot buy the next Monday, but have to wait until Wednesday. Does THIS make sense?

I called around other brokers, IB, MB, and TradeStation and they all treat cash accounts the same way. They will NOT let you trade with proceeds from the previous day's sale.

BUT, Scottrade will let us trade this way in the cash account. Scottrade still abides by the Trade date + 3 regulation but it seems more leniant. They will let us sell the stocks on Friday and use the proceeds to buy new stock on the following Monday with the warning that if we sell this newly stock before 3 days have passed that it will THEN and only then be a free ride violation.

So, with those details in hand, I need to know is this just a unique benefit of Scottrade or are there other firms out there (with lower commissions) that are flexible in this regard? Again, keep in mind that this is cash-only, IRA account.

Thanks.
More...

the rule is 3 business days. weekends are not business days.
 
Quote from vhehn:

the rule is 3 business days. weekends are not business days.
More...

I already know it's 3 business days, but Scottrade still lets you trade the next day with the previous day's proceeds and am just wondering if they are unique in this regard or if other firms let you do this as well in cash accounts like an IRA.

A broker like Scottrade is very expensive compared to most direct access platforms, so it's not my preference but if it's the only broker that allows this flexibility, then I'm stuck there. I DOUBT that Scottrade is the only brokerage that offers this, though...
 
Quote from alanm:

IB has a "margin IRA" that I think allows you to re-use funds immediately.
More...

I highly doubt any type of Margin in an IRA is allowed, but I can call IB to double-check. I've never spoken with them, I hear they have a great trading platform and prices but terrible phone service. I will post what I find out at IB.

Separately, I just confirmed with TradeKing that they also allow you to use proceeds from a previous day's sale in a cash account. Again, not what I'm looking for, but TradeKing is at least cheaper than Scottrade.
 
Quote from Stecchino:

I already know it's 3 business days, but Scottrade still lets you trade the next day with the previous day's proceeds and am just wondering if they are unique in this regard or if other firms let you do this as well in cash accounts like an IRA......
More...

I could be exactly wrong on this, but it appears that Scottrade is violating the rules. Maybe someone can provide some clarification.
 
Thank you, AlanM

Just got off the phone with Bob at IB...

He told me that some time recently (he said about 2 months ago)...IB got clearance from the regulators to start offering a "margin agreement" to their IRA customers.

He said the term "margin agreement" was misleading because no leverage is extended to the IRA account, but rather, the customer is allowed same-day substitution and immediate credit with proceeds, LIKE a margin account, instead of the 3-day wait period like at most brokers. So, this is, in essence, exactly what I needed to find out. :-D

In regards to Scottrade breaking the rules...perhaps the regulation states that you must wait 3 days but that it's up the broker and how the broker sets their policy as to how they enforce the regulation? I don't have any experience or further knowledge on this.
 
FWIW,

Ameritrade does NOT offer next day or immediate availability of proceeds.

E-Trade - NO

TDWaterhouse - YES

Anyway, I'll be looking into IB.
 
Don't know how I missed it before:

http://www.interactivebrokers.com/en/accounts/iraClasses.php

"US resident customers may open cash or margin Individual Retirement Accounts (IRA). IRA margin accounts may never borrow, but are afforded all the other benefits of a margin account such as the ability to day trade, and the ability to trade multiple currencies and multiple currency products. IRA accounts may be opened in any base currency, but when trading in a non-base currency product (margin accounts only) a currency trade must first be executed as you cannot borrow currencies. "
 
Stecchino, In Ameritrade's cash accounts, you do not have to wait 3 days after the sale date before you can buy using the proceeds of the previous purchase. Their interpretation of rules is little bit different. Besides, in their web site, I saw a term "Next Day Settlement". I am not 100% what they meant. According to TradeKing, it replenishes your buying power overnight even in IRAs. You used to be able to buy again at Lowtrades. I do not know whether you can still do it or not. IB's IRA-margin accounts still need to follow PDT rules. But if you have more than $25k in your IRA, you should be fine. Could you explain how TD Waterhouse replenishes its buying power? Do they do it immediately or overnight?
 
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