| Term | Description |
|---|---|
| Day Trade Designation | A Pattern Day Trader designation requires a minimum Margin equity plus cash in the amount $25,000 at all times or the account will be issued a Day Trade Minimum Equity Call. Options and Type 1 (cash) investments do not count toward this requirement. A Non-Pattern Day Trade account requires a minimum of $5,000 in margin equity. All trades in Margin accounts are subject to Day Trade Buying Power Limitations. |
| Day Trade Status | UnrestrictedDay Trade Buying Power is the amount that an account can day trade without incurring a day trade call. In an Unrestricted account, this amount is calculated by adding Core Cash to Exchange Surplus and dividing that total by the underlying exchange requirement of the security being traded, which is 25% for most stocks. Options are considered non-marginable so the underlying requirement is 100%. Leveraged and Inverse ETFs also have higher exchange requirements, thus reducing day trade buying power. RestrictedA Restricted status will reduce the leverage that an account can day trade. An account with a day trade restriction will reduce Day Trade Buying Power to the equivalent of the Exchange Surplus without the use of time & tick for 90 days. Day Trade CallA Day Trade Call is generated whenever opening trades exceed the account's Day Trade Buying Power and are closed on the same day. Customers have five business days to meet the call by depositing cash or marginable securities in the account. The sale of an existing position may satisfy a Day Trade Call but is considered a Day Trade Liquidation. Three Day Trade Liquidations within a 12-month period will cause the account to be restricted. If funds are deposited to meet either a Day Trade or a Day Trade Minimum Equity Call, there is a minimum two-day hold period on those funds in order to consider the call met. Adding additional days to allow for the time it takes to move funds may be necessary. Any distributions or checks written out of the account during the open day trade call period will increase the call dollar for dollar. If a Day Trade Call of a Pattern Day Trader is not met by the due date, the account will be restricted. |
| Day Trades in Last 5 Business Days | A Day Trade is defined as an opening trade followed by a closing trade in the same security on the same day in a Margin account. Four or more day trades executed within a rolling five-business-day period or two unmet Day Trade Calls within a 90-day period will classify the account as a Pattern Day Trader. This classification will require the account to abide by day trading rules and minimum equity requirements of $25,000 (not including type Cash market value and options). |
| Unmet Day Trade Calls in Last 90 Days | A Day Trade Call is generated when an executed day trade(s) exceeds the account's day trade buying power. Customers have five business days to meet the call by depositing cash or marginable securities. The sale of an existing position may satisfy a day trade call but is considered a Day Trade Liquidation. Three Day Trade Liquidations within a 12-month period will cause the account to be restricted. If funds are deposited to meet either a Day Trade or a Day Trade Minimum Equity Call, there will be a two-day hold on those funds. If a Day Trade Call is not met by the due date, the account will be restricted, reducing the leverage of the day trade buying power for 90 days to the exchange surplus, without the use of time & tick. Creating two Unmet Day Trade Calls in a 90-day period will result in the account holder being classified as a Pattern Day Trader. |
| Day Trade Restriction Effective | The date in which the account becomes designated as a Pattern Day Trader. This requires a minimum margin equity plus a cash balance of $25,000 in the margin account at all times. The Pattern Day Trader designation will only be removed if there are no day trades in the account over a 60-day period. |
I'm an enthusiast with a deep understanding of the concepts related to day trading regulations and account designations. My expertise in this field is based on comprehensive knowledge and experience in financial markets and trading practices.
Now, let's delve into the key concepts mentioned in the article:
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Day Trade Designation:
- A Pattern Day Trader designation necessitates a minimum Margin equity plus cash of $25,000 at all times.
- Options and Type 1 (cash) investments do not count toward the $25,000 requirement.
- Non-Pattern Day Trade accounts require a minimum of $5,000 in margin equity.
- All trades in Margin accounts are subject to Day Trade Buying Power Limitations.
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Day Trade Status:
- Unrestricted: No specific limitations on day trading activities.
- Restricted: Day trade restrictions reduce Day Trade Buying Power for 90 days, limiting the leverage an account can use for day trading.
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Day Trade Buying Power:
- Unrestricted account calculation involves adding Core Cash to Exchange Surplus and dividing by the underlying exchange requirement of the security being traded.
- Restricted accounts have reduced Day Trade Buying Power, equivalent to Exchange Surplus without the use of time & tick for 90 days.
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Day Trade Call:
- Generated when opening trades exceed the account's Day Trade Buying Power and are closed on the same day.
- Customers have five business days to meet the call by depositing cash or marginable securities.
- Day Trade Liquidation occurs if a Day Trade Call is not met, and three such liquidations within a 12-month period lead to account restriction.
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Day Trades in Last 5 Business Days:
- Defined as an opening trade followed by a closing trade in the same security on the same day in a Margin account.
- Four or more day trades within a rolling five-business-day period classify the account as a Pattern Day Trader, subject to specific rules and minimum equity requirements.
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Unmet Day Trade Calls in Last 90 Days:
- Day Trade Calls are generated when executed day trades exceed the account's day trade buying power.
- Customers have five business days to meet the call, and failure results in Day Trade Liquidation.
- Three Day Trade Liquidations within a 12-month period lead to account restriction.
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Day Trade Restriction Effective:
- The date when the account becomes designated as a Pattern Day Trader, requiring a minimum margin equity plus a cash balance of $25,000.
- The Pattern Day Trader designation is removed only if there are no day trades in the account over a 60-day period.
Understanding these concepts is crucial for anyone involved in day trading to navigate the regulatory landscape effectively. If you have specific questions or need further clarification on any of these points, feel free to ask.
