fuzzballl 12:53 pm on Friday, February 2, 2024
Tags: SyntheticShortStock ( 108 )

SPX

#SyntheticShortStock – Fidelity tagged me with a day trading penalty from all the roll ups I did one day last week. Really happy with how the SPX experiment has gone so far but if we don’t have a resolution from Fidelity I’m going to have to put the experiment on hold for 90 days.

If I have to close everything right now it’ll be for about a 2 grand loss. Not bad in this crazy up market almost keeping up with the rise with daily put sales. Just don’t crash until I get back in!! LOL Know for sure on Monday.

Expiring : SPX Feb 02 2024 4900.0 Puts @ 13.20 credit

jsd501 12:58 pm on Friday, February 2, 2024

Hey did the sane to me as well. This pattern day trading rule does not make sense.
- fuzzballl 1:07 pm on Friday, February 2, 2024
  
  Especially when I’ve got over 400 grand in buying power and they won’t let me do a roll to the next day. Fidelity is a joke as far as their software and website go. I’m looking forward to getting back to Think or Swim at some point. The 5 percent cash sweep interest is the only reason I’m there. That adds up nicely over the course of a year.
  - geewhiz112 1:25 pm on Friday, February 2, 2024
    
    I’m at Schwab who is moving everyone to Think or Swim. They have the cash sweep at about 5% but you have to sweep it yourself.
    - fuzzballl 1:29 pm on Friday, February 2, 2024
      
      I thought about doing that. I had been at Fidelity before and the sweep is invisible to the user which is nice. Once rates start coming down I’ll have to decide if it’s worth staying.
    - geewhiz112 1:31 pm on Friday, February 2, 2024
      
      This is Schwab’s PDT explanation:
      
      Day trading means entering and exiting a position in a security within the same day. Day traders often use margin, or money borrowed from a brokerage, to increase leverage. While this could potentially increase profits, it can also lead to significant losses.
      
      To help protect novice investors from large losses, in 2001, the Financial Industry Regulatory Authority, or FINRA, created the pattern day trader, or PDT, rule. Under the PDT rule, any margin account that executes four or more day trades in a five-market-day period is flagged as a pattern day trader. Getting flagged isn’t necessarily bad; it just puts the account under a little more scrutiny. Once your account is flagged as a pattern day trading account, you’re required to maintain a minimum of $25,000 of equity in that account in order to day trade securities.
      
      Flagged accounts below this equity level can face restrictions, so it’s important to understand what counts as a day trade and what happens to your account once you’re classified as a pattern day trader.
      
      So, what counts as a day trade?
      
      Under the PDT rule, a day trade is the purchase and sale, or sale and purchase, of the same security in a margin account within a single trading day, sometimes called a “round trip”. It applies to both long and short trades and includes pre- and post-market trading.
      
      The key to determining what counts as a day trade is matching buy and sell orders. For example, let’s assume your account has no trades at the beginning of the day. Then, you buy to open 100 shares, which means you purchase 100 shares to open a new position. Later, you add another 100 shares. And then, you buy 100 more shares, for a total of 300 shares. Later that day, you enter an order to sell to close those 300 shares. Despite there being three buy orders, there’s only one exit order. This means there’s only one pair of matching entry and exit orders, so it’s only one day trade.
      
      The opposite is also true. If you buy to open 300 shares and sell them off in three separate orders throughout the day, it’d still only be one day trade because there’s only one buy order.
      
      However, there are some exceptions when buy and sell orders in the same day may not match and thus don’t count as a day trade. This can happen if you’re closing an existing position that was opened during a previous trading day. For example, let’s say you already own 100 shares of a stock. When the market opens, you sell to close 100 shares. Later, you decide to buy to open 100 shares. You have one sell order and one buy order in the same day, but it doesn’t count as a day trade because the first sell to close matched with a buy order from a previous day, so it cannot match with the buy order in the current day.
      
      To help keep track of your day trades, refer to the Account Info window on the thinkorswim® trading platform. But it’s important to understand what happens if you surpass the allowed number of day trades. An account that’s flagged as a pattern day trading account and has less than $25,000 in equity will receive a Day Trade Minimum Equity Call, or Equity Maintenance Call. You aren’t required to immediately meet this call with funding, but if you place any more day trades while under the call, your account will be restricted to closing transactions only. This means you can close existing positions but can’t open any new ones. The Equity Maintenance Call ends when either you bring the account equity above $25,000, or the PDT flag is removed from the account. A pattern day trading flag can only be removed one time from your account. If the account is later reflagged as PDT, the flag will remain on the account.
      
      Remember that the $25,000 equity balance is the key. If you don’t meet that requirement, you won’t be allowed to day trade consistently. If you’re concerned about being flagged as a pattern day trader, make sure you have a plan. Predetermine your entries and exits, and track when you place trades, so you know when you’ve hit your limit. Understanding and following PDT rules can help you avoid restrictions on your account.
      - fuzzballl 1:40 pm on Friday, February 2, 2024
        
        The 25,000 equity is deceiving. The guy told me I could have 10 million in the account and it wouldn’t change anything so that’s kind of a gray area. That’s why I wasn’t too concerned at first. They also did remind me about the part of being a repeat offender then you are done. No third chance.
Option Iceman 1:03 pm on Friday, February 2, 2024

They did worse to me. Can’t do any margin spreads in my IRA
Moved a bunch of free cash to Schwab instead
- fuzzballl 1:23 pm on Friday, February 2, 2024
  
  Just got off the phone again. The way they explained it:
  
  If I start the day short a put and it’s paired up with a long LEAP put (in my case in 2025 and 2026) it’s margined as a spread. What I was doing was rolling the put up a few times on days like today to keep my deltas in line. As soon as I do the roll the long LEAP is no longer recognized and that daily short put becomes margined as naked. Makes no sense.

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