Personal Finance & Money Asked by DreamWvr on September 29, 2020
I’ve been trading options on a pattern day trading account for a couple of years and now want to trade stocks.
Options are settled overnight and funds available the next day. And day trading buying power for over $25,000 in account is 4 x.
How does this work for stocks where settlement is T+2?
Does the broker lend you the funds on margin to be able to trade the next day and is the buying power still 4 x?
Example: If I have $30,000 cash in account and day trade $120,000 worth of stocks, do I have to wait 2 days to trade again, or will the broker lend me the funds on margin till it’s settled so I can trade another $120,000 the following day?
The Pattern Day Trader rule is the same for options and equities other than the settlement time. It offers 4x leverage intraday (2x overnight) unless the broker has a more restrictive margin requirement or if you are trading leveraged ETFs which have higher margin requirements.
Waiting two days to trade again only applies to a cash account (T+2). The margin account allows you to trade again, immediately.
Do not approach 4x intraday because intraday price fluctuations may put you over the limit and cause a margin violation
Answered by Bob Baerker on September 29, 2020
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