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Theta_Ome t1_jab7rvb wrote

Reply to comment by Funny_Initial3398 in Webull policy update regarding Pattern Day Trading. by Present_School_8754

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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