Your Biggest PDT Rule Questions Answered Before June 4th
Your Biggest PDT Rule Questions Answered Before June 4th
PDT Rule Mailbag: Your Top Questions Answered
The pattern day trading rule is going away on June 4th, and traders have questions. In the video below, Nick Battista and Mike Butler work through a mailbag of your most common questions, covering everything from cash account settlement to margin calls and short selling.
Here are six of the most important questions answered.
Can I day trade as many times as I want in a margin account after June 4th?
Yes. The restriction that previously limited margin account holders under $25,000 to no more than four day trades in a five-day rolling period is being eliminated. Starting June 4th, if you have the available buying power to open a position, you can trade in and out of it as many times as you want. For options specifically, your options buying power simply needs to stay above zero, and the tastytrade platform will not allow you to execute a trade that brings it below that threshold.
Does anything change for cash accounts?
No. Cash accounts are unaffected by this rule change. However, T+1 settlement still applies, meaning you will need to wait one day for cash to become available after closing a position. If you want to take advantage of the new framework, you can open a margin account at tastytrade and internally transfer your cash balance from your cash account.
What is replacing the PDT rule?
The PDT rule for Reg T margin accounts is being replaced by an intraday margin framework. For most traders at tastytrade, this transition is automatic. You do not need to enable anything or change your account type. The new framework removes the trade count restriction and replaces it with a straightforward buying power check. If your available capital stays above zero, you can continue trading.
What happens to day trade calls and starting day trading buying power?
Both are gone. Starting day trading buying power was a backward-looking number that capped how much you could day trade based on your account balance at the start of the day. Even if you had $50,000 in your account but were already using $49,000 of it, your starting day trading buying power would only be $1,000. Day trade calls, which triggered when your activity exceeded that number, are also eliminated under the new framework.
Can I still get a margin call?
Yes. Margin calls do not go away. If you lose more than your available capital, which can only happen through stock positions and not options, you can still be placed in a margin call. There is also expiration risk to keep in mind: if you are holding an equity option near expiration and it expires close to the money, an after-hours move could result in assignment and a margin call the following day. Managing positions carefully near expiration remains important regardless of the PDT changes.
What about short selling?
Short selling is still allowed and falls under the same new intraday margin framework. Whether you are shorting stock or selling short options, there is no separate restriction. The key consideration is the same as with any other trade: your available capital needs to support the position.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
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