Unlimited Day Trading Now On Cash Accounts?

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Illini Trader

I put a question mark on this as I am basing this thread on my recent actual experience with Schwab TOS Platform and have not found specific regulations governing this.

Previously you could have as many day trades as you wanted in a "Cash Brokerage Account" but limited by the total Cash in your account. Say you had $5,000 in your account you could day-trade all you could up until the total value of your trades equaled $5,000 --- then you were done for the day.

On Thursday my "Option Buying Power" total on my TOS Cash Account was down to a few bucks until I closed an option that I had opened earlier that day. My option trading style is to hold options for a few days so If was very surprised to see my "Option Buying Power" increase by the proceeds from my sale. So I purchased another option and it allowed me to do so. I sold it and again it increased my "Option Buying Power" again.

I tested this out on Friday and it allowed me to continue to use the same cash over and over again. This opens up a whole new trading arena for those who want to day trade without having to put 25K plus into a margin PTD account.

I am guessing this may have been included somewhere in the recent changes on settlement periods but have not been able to verify that. Or, maybe it has been this way for a while and I just did not know it.
 
Illini Trader said:
I am guessing this may have been included somewhere in the recent changes on settlement periods
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You just answered you own question. Good for you. :)

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“… I tested this out on Friday and it allowed me to continue to use the same cash over and over again. This opens up a whole new trading arena for those who want to day trade without having to put 25K plus into a margin PTD account…”


Weird, I made a lot of option trades(100s) in my Schwab-TOS cash account daily and found no such cheat. The BP dropped even on Friday with T+1’s imminent arrival. Wait, how will T+1 affect options? Were they T+2 and I didn’t know? Are options now T+0?
 
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Sounds like a "T+Now" settlement if you're recycling it intraday. Cannot do anything but long shares and long singles.
 
Here’s a sample of one option trade.


“Dell $162.5 Call
cash
Trade Date: 05/24/24
Settle Date: 05/28/24
Quantity Price Principal Charge and/or Interest Total Amount

Commission:”

Settlement still T+1.


Settlement still T+1? You should probably be getting a Good Faith Violation on Tuesday unless you’re a SS or SSS rated gamer.
 
Illini Trader said:
I put a question mark on this as I am basing this thread on my recent actual experience with Schwab TOS Platform and have not found specific regulations governing this.

Previously you could have as many day trades as you wanted in a "Cash Brokerage Account" but limited by the total Cash in your account. Say you had $5,000 in your account you could day-trade all you could up until the total value of your trades equaled $5,000 --- then you were done for the day.

On Thursday my "Option Buying Power" total on my TOS Cash Account was down to a few bucks until I closed an option that I had opened earlier that day. My option trading style is to hold options for a few days so If was very surprised to see my "Option Buying Power" increase by the proceeds from my sale. So I purchased another option and it allowed me to do so. I sold it and again it increased my "Option Buying Power" again.

I tested this out on Friday and it allowed me to continue to use the same cash over and over again. This opens up a whole new trading arena for those who want to day trade without having to put 25K plus into a margin PTD account.

I am guessing this may have been included somewhere in the recent changes on settlement periods but have not been able to verify that. Or, maybe it has been this way for a while and I just did not know it.
More...
Pretty sure it has always been that way. In your example, if you had 5K in settled cash (day 1), you could open and close 5K worth of option trades. You could then purchase 5K more worth of options, but the only caveat is that you have to hold those overnight.

If you sell all of them the next day (day 2), you again have 5K worth of buying power, but no daytrade buying power. IE, say you buy 1K of options that day (day 2), you must hold them overnight. The next day (day 3), you will have 4K that you can daytrade with because it has settled from (day 2's) sale. If you close the 1K you bought on day 2, you'll have 5K in buying power, but only 4K is settled, so anything you buy in excess of 4K must again be held overnight.

When you say your buying power increased and it had never done this before, is there a chance there was a restriction on your account that you didn't know about and it had just expired? If you do 3 good faith violations, the account will be restricted to purchasing with settled cash only. I think for 6 months but don't quote me on that. If this were the case, your account would have in fact behaved like you said it did prior to this... 5K in round trips would leave zero purchasing power.

I might add, I don't know how many round trips you did the other day, but if it exceeded your balance at the start of the day... EACH of those round trips is a good faith violation... so if you did three rt's in excess of your settled cash at the begining of the day... you'll be back in the penalty box for (6 months?) again and you'll be back where you started.
 
vanzandt said:
Pretty sure it has always been that way. In your example, if you had 5K in settled cash (day 1), you could open and close 5K worth of option trades. You could then purchase 5K more worth of options, but the only caveat is that you have to hold those overnight.

If you sell all of them the next day (day 2), you again have 5K worth of buying power, but no daytrade buying power. IE, say you buy 1K of options that day (day 2), you must hold them overnight. The next day (day 3), you will have 4K that you can daytrade with because it has settled from (day 2's) sale. If you close the 1K you bought on day 2, you'll have 5K in buying power, but only 4K is settled, so anything you buy in excess of 4K must again be held overnight.

When you say your buying power increased and it had never done this before, is there a chance there was a restriction on your account that you didn't know about and it had just expired? If you do 3 good faith violations, the account will be restricted to purchasing with settled cash only. I think for 6 months but don't quote me on that. If this were the case, your account would have in fact behaved like you said it did prior to this... 5K in round trips would leave zero purchasing power.

I might add, I don't know how many round trips you did the other day, but if it exceeded your balance at the start of the day... EACH of those round trips is a good faith violation... so if you did three rt's in excess of your settled cash at the begining of the day... you'll be back in the penalty box for (6 months?) again and you'll be back where you started.
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“I think for 6 months but don't quote me on that. If this were the case, your account would have infact behaved like you said it did prior to this... 5K in round trips would leave zero purchasing power.”

90 Day Restriction, penalty box after 3rd GFV in rolling 12 month period.
 
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