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No_Cardiologist8650 t1_jaajgbw wrote

Just switch to a cash account

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Funny_Initial3398 t1_jaak1sr wrote

Question with a cash account don’t you have to wait for your trades to settle for cash to be available again to trade otherwise if you sell the assets before cash has settled it’s term “free riding” and are eligible for your account to be frozen by the gov?

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Theta_Ome t1_jab7rvb wrote

Cash account is easy. Tell your broker to set your account to only trade with settled funds.

Split your account in half.

Trading with unsettled funds is a good faith violation, and there's another violation if you then SELL that same opened position before the first buy transaction was settled. But if you set your account to reject orders if you don't have settled funds, you're good in most cases.

You can take as many trades as you have the cash to cover it.
So you can take one trade with your entire amount (half your account), or you could take 10 trades using 10% of your settled balance for that day. Either way, more ability to trade than with PDT restrictions - except no margin.

Margin = pdt restrictions
Cash = no PDT restrictions, but you have to use settled cash

Next year when the market shifts to T+1, you will be able to trade with your entire account each day.

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Master-Reaction-2336 t1_jabnd75 wrote

Good advice but I thought Options always been t+1 ?

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Daymanic t1_jacwams wrote

Cash account you can buy with unsettled funds but have to wait for it to clear before selling (T+1 options T+2 stocks or T+3 for deposits is general rule, check your broker to verify) otherwise you are at risk of a getting a GFV. I trade options with unsettled funds all the time, just have to be able to nut out holding through the day if you’re getting your ass handed to you. That’s the general rule, check with your specific broker rules for any nuances they include

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Theta_Ome t1_jaeinia wrote

You really can’t, they call it a good faith violation and if you read the terms of service it’s grounds for terminating your account if it’s a regular occurrence. While you can technically enter a position if it’s a situation where you plan to deposit money, you could get away with it. But selling instead of depositing funds is a secondary violation. These are banking laws, not broker laws.

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Daymanic t1_jaerg3e wrote

Well you’re wrong, it’s right in the first sentence. But I’ll give you benefit of the doubt because I wracked my brain over it for the first few months of day trading.

Good faith violation What is it? A good faith violation occurs when you buy a security and sell it before paying for the initial purchase in full with settled funds.

https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations

Consequences: If you incur 3 good faith violations in a 12-month period in a cash account, your brokerage firm will restrict your account. This means you will only be able to buy securities if you have sufficient settled cash in the account prior to placing a trade. This restriction will be effective for 90 calendar days.

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Theta_Ome t1_jaesl6o wrote

I have been using a cash account to day trade equities since 2016, before free commission. I'm not going to take this conversation personally because I know how complicated it is to get your head wrapped around GFVs.

Buying the security without having settled funds is a good faith violation.And per your own link - if you sell that position before you have deposited funds to cover that settlement, as in, if you attempt to simply sell the position and let that pay for the original purchase- you have a freeriding violation.

You cannot regularly commit GFVs in a cash account. You made it seem like you can but you can't, even if you hold it overnight - you have to deposit cash and let it settle to cover that initial purchase. These are not broker specific rules, these are banking regulations. It's basic accounting.

This might have a bit of leeway if you're trading cash-settled option. My experience is in equities.As you pointed out, 3 GFVs in a year and your account is restricted at a minimum. But many brokers will simply close your account - mostly because it shows you don't know what youre doing and youre making a mess of their books, making regulators look at them, etc.

Edit: TL;DR If you buy a position with unsettled funds, that is a good faith violation whether you hold it overnight or not. The purchase is a violation. Selling the position before you have added money to cover that settlement is another violation. You cannot do this regularly, as you implied.

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Frapdizzle t1_jacmwfc wrote

Damn, I wish I knew this before. Thanks for sharing.

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No_Cardiologist8650 t1_jaam82f wrote

Yeah, that is true. But if you have a sizable account, let’s say 5k+ and you’re taking “reasonable”-sized trades (I know it’s WSB but still). It’s hard to reach that limit to wait for more cash to be settled the next day.

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Present_School_8754 OP t1_jaal0t3 wrote

I'm not worried about being flagged as a PDT. Just wanted to share with everyone a screenshot of the change being made.

A policy like this isn't something I support. I'll just wait until my current positions are concluded and swap brokerages. Any good recommendations I can look into?

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LordPontificus t1_jaasry3 wrote

This is part of FINRA regulatory notice 21-13, it applies to every broker dealer and clearing firm. https://www.finra.org/rules-guidance/notices/21-13

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Joghobs t1_jab3g8n wrote

Jesus fuck. The gov is going the opposite direction we wanted them to on this

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BossHogOne t1_jacaxdc wrote

Going in the opposite direction? This has been around for years. I can’t believe WeBull was letting people remove the flag every 90 days. A one time exception is the industry standard.

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logicallyillogical t1_jacvjbk wrote

No, it's actually better. If you scaled into a position, every buy and every sell is a trade. Now,

Example A: 

09:30 Buy 250 ABC 
09:31 Buy 250 ABC 
13:00 Sell 500 ABC 
The customer has executed one day trade. 

This is actually much better. Still is bullshit, but this is clarifying part of the PDT rule.

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BullyBumble t1_jad3n7j wrote

Your example was always just 1 daytrade

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logicallyillogical t1_jadfdou wrote

Not with Etrade, that would have been 2 trades. I got suspended for 90 days because of that bullshit.

I moved to a cash account last year anyways and it's much better for day trades.

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viperex t1_jack69p wrote

Here's my question: why do they make out PDT to be a bad thing? What are they trying to prevent?

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BeerPizzaGaming t1_jackx52 wrote

Highly leveraged bets which destabilize the markets. You know, the stuff the really big firms do daily that when they are margin called, they get bailed out by tax payers via different methods. Most directly and glaring example would have been in 2008.

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conlius t1_jado4mj wrote

Is that actually what they are trying to solve? Because PDT flag just forces you to keep more collateral in the account. In reality it seems they just don’t want people with small accounts day trading on margin.

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reercalium2 t1_jad2p1a wrote

Apparently it's something to do with unsettled funds

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LordPontificus t1_jadccgr wrote

Yes- if I had to guess it’s this. Believe it or not settlement risk is still a thing and we’re still on t+2. Day trading is inherently riskier and it adds stress to the settlement process so this was kind of a no brainer. It basically says you can day trade all you want but put up the money to prove you’re not a complete idiot. Makes sense

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Master-Reaction-2336 t1_jabmz0q wrote

No not butt hurt but I’m taking my 5k and switching brokerages, that’ll show them.

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Unknownirish t1_jac4s01 wrote

Fidelity. Heck, and I know I know every one hates them, Robinhood has been on their game lately. Lol

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No_Cardiologist8650 t1_jaame6m wrote

That makes sense. Yeah, I couldn’t tell you off the top of my head. Is Robinhood implementing the same thing?

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Del_Phoenix t1_jacp87n wrote

robinhood has always had only 1 lifetime reset.

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Present_School_8754 OP t1_jaevhjp wrote

Not true, I've been PDT flagged twice and have had it reset. (Primarily because I was swing trading 0 DTE spy options) Don't really regret the flags either because had I not flagged myself I would've nuked my acc by letting them expire.

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Present_School_8754 OP t1_jabqefh wrote

It's alright, I believe Robinhood being the scumbags they are will likely follow suit.

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Asleep-Actuator-7292 t1_jaayn6x wrote

I do believe Webull is the best system out there.

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AwesomeRevolution98 t1_jaanwby wrote

How would that over ride their rules . Sucks for the degens trying to play the fomc meetings. CPI days will still be as their pre market.

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No_Cardiologist8650 t1_jaapiaj wrote

It doesn’t really, but a bigger account that isn’t at 25k yet (let’s say 5-10k) can still day trade as much as needed with extra cash that’s settled as opposed to violating the 3 same day trade rule if you’re margin.

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Yeetus-tha-thurd t1_jab219s wrote

Can you clarify this please. My understanding is 4 trades in a 5 business day period. If its the same stock you must wait two days. Otherwise there is a $25,000 minimum balance, (so more like $30,000), for no PDT flags. How can you "still day trade as much as needed"?

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mghollan t1_jab49tw wrote

Cash account.

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Yeetus-tha-thurd t1_jab52rp wrote

Is this only on certain platforms? I have TD ameritrade and a cash account and dont think they allow this.

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mghollan t1_jab65rk wrote

Not sure man. I know webull and Robinhood allow it. It's all I use for trading. Keep some cash in reserves and trade with the rest. Funds from settled trades on are ready next morning

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No_Cardiologist8650 t1_jab8pdk wrote

Webull will definitely let you do it. There’s an option in your settings, it does take like 5ish days for them to switch your account.

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etrimmer t1_jabmnr6 wrote

options settle next day on cash account in TDA.

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