New Day Trading Requirements for Option Trades
On Friday, September 2, we will be implementing FINRA regulations that will significantly change day trading requirements and calculations:
- Beginning Friday, 9/2/11, any option trade that is closed the same day (Day Traded) will have a Day Trade Buying Power Requirement. Trades which currently have no margin requirement will now have Day Trade BP requirements.
- The margin requirements for short option day trades will change significantly.
- Money market sweep funds will not be included in Day Trade Buying Power for pattern day traders. If you are a pattern day trader (see definition) and need to move funds to accommodate these new guidelines, click here for instructions.
Day Trading Definitions
Day Trading Strategy Table
Day Trading Examples
Day Trading Definitions
Day Trade
A day trade is the opening and closing of the same security in the same trading day.
Pattern Day Trading Account (PDT)
A PDT is any account which makes more than 3 day trades in a 5 business day period.
Day Trading Margin Call (DT)
This call occurs when an account exceeds its available day trading buying power. If you receive a day trading margin call, your account will be on aggregation status.
Aggregation
Aggregation status means the total cost of ALL day trades in one day cannot exceed your Starting Day Trade Buying Power. Also accounts in Aggregation cannot use margin to day trade. All accounts with less than $2,000.00 in Margin Equity are 1 time aggregation status.
Starting Day Trade Buying Power (BP)
Federal minimum required maintenance excess calculated overnight. This amount does not increase from the start of the trading day.
Margin Equity
Sum of all marginable securities plus cash in an account. Accounts with less than $2000.00 of margin equity cannot trade using margin.
Day Trading Strategy Table
* Please note that for non pattern day traders the DT charge for naked options will be the net premium taken in.
** Naked option calculations are based on normal FINRA requirements (20%). Some products may have higher requirements. Please contact the trading desk for exact specifications.
Day Trading Examples
In all examples client begins day with $2,500 of starting day trade BP (maintenance excess).
Day Trading a Covered Call (Existing position Long 1000 shares XYZ $50)
Old Rules
New Rules
Reg-T rules allow a trader to sell a call against a long stock position without incurring any additional margin requirement. This has been true for day trading covered calls as well. Under the new rules the sale of the calls covered by long stock will be charged a day trading requirement equal to the premium taken in. In the above example the DT requirement is $4,000 which exceeds the starting excess of $2,500 and results in a day trading margin call in the amount of $1,500.
Day Trading a Time Spread (Beginning position Long 10 contracts ZZZ October 100 puts)
Old Rules
New Rules
Like the covered call, there has, and will continue to be, no Reg-T margin requirement for selling nearer term options at the same strike or a further out of the money strike. Under the new day trading rules there will be a DT requirement equal to the premium generated by the sale of the nearer term option which in the above example leads to a DT call for $5,500.
Naked Option (No positions coming in (GGG trading $9.75))
Old Rules
New Rules
The change in the rules for day trading naked options will be significant. Currently the rules allow the premium received to be applied to the total requirement. In the example above the naked Reg-T requirement is the premium received plus 20% of the underlying stock less the out of the money amount. New rules do not allow for the premium received to be applied to the DT requirement. In this case a DT margin call in the amount of $1,200 is generated.
Credit Spread (No position coming in)
Old Rules
New Rules
Reg-T and current day trading rules allow the proceeds from the credit spread to offset the strategy requirement which is the difference between the strikes times the number of contracts. In the above example the trader sells a 4 point spread ten times ($4,000 strategy requirement) and brings in a credit of $1,750 for a total requirement of $2,250. Excess is not exceeded. Under the new DT rules, the day trading requirement is the greater of the net premium of the spread or the strategy requirement. In the example above the $4,000 requirement is greater than the net premium ($1,750) so that is the DT requirement. This generates a DT call of $1,500.
Moving Money Market Funds
If you wish to disable your sweep and move funds from your money market into cash, please email this request to
customerservice@optionshouse.com from your e-mail address on file and include the following information:
- The e-mail/letter must list name(s) of account holder(s).
- The last four digits of social security number(s) of account holder(s).
- The account holder(s) date of birth.
- At a minimum, the last four digits of the account number in question.
You may also send a signed and dated fax with your above request to 1-866-492-2478.
