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Trading Leveraged ETF's
Started:October 23rd, 2016 (12:32 PM) by RAM011558 Views / Replies:320 / 10
Last Reply:November 12th, 2016 (09:56 AM) Attachments:0

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Trading Leveraged ETF's

Old October 23rd, 2016, 12:32 PM   #1 (permalink)
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Trading Leveraged ETF's

Good Morning,

I am fairly new to this so please forgive what may be simplistic questions. Here's what I know. In order to avoid settlement delays, one must trade in a margin account. A pattern day trader must have a minimum balance of $25K. Here's what I don't know.

For a 3 X leveraged ETF, do you need to keep a minimum of $75K in a margin account ($25K x leverage)?

I won't be using margin, does this matter?

If the $75k is a requirement, is there a way around this?

I read somewhere that most people trading leveraged ETF's don't trade in a margin account. If this is the case, what other account type would they be using?


Appreciate the help with this.

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Old October 23rd, 2016, 12:32 PM   #2 (permalink)
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Old October 23rd, 2016, 05:00 PM   #3 (permalink)
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No. SEC PDT rule just states that your day trading account must always show a positive
equity of >= $25k. If your day trading account falls below 25k you can

a) deposit fresh funds to restore the SEC minimum;
b) wait 90 days until you can initiate the first new position.

Concerning your leverage question: Leverage isn't part of the SEC PDT rule.

P.S.: If you are interested in examples and details, see e.g. https://www.interactivebrokers.com/en/index.php?f=marginnew&p=daytrade

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Old October 23rd, 2016, 07:25 PM   #4 (permalink)
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Thank you choke35. Below is an exert from an article in an ETF website. This was apparently enacted in 2009. Sorry, because I am new to this forum, I am unable to give you the link. What are your thoughts? Again, appreciate the help.



Under Rule 2520, such traders using margin accounts were required to put up a daily maintenance requirement of $25,000. With the new FINRA rule, that amount gets multiplied by the same factor of magnification of returns that a particular leveraged ETF uses, according to a notice on the rule FINRA circulated in September 2009.

For example, pattern day traders in margin accounts using ProShares funds that multiply returns by a factor of 2 would have a $50,000 minimum daily maintenance requirement. Such traders favoring Direxion triple-exposure funds would have a $75,000 minimum daily maintenance requirement.

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Old October 23rd, 2016, 09:48 PM   #5 (permalink)
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Futures Edge on FIO
You could get an offshore account, such as Suretrader, as a workaround.

Being located offshore myself, I trade leveraged ETFs using Saxo via CFD, with no PTD restrictions. Admittedly CFDs are not an ideal arrangement, but they meet my requirements for that limited aspect of the trading.

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Old October 24th, 2016, 04:27 AM   #6 (permalink)
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RAM011558 View Post
Thank you choke35. Below is an exert from an article in an ETF website. This was apparently enacted in 2009. Sorry, because I am new to this forum, I am unable to give you the link. What are your thoughts? Again, appreciate the help.



Under Rule 2520, such traders using margin accounts were required to put up a daily maintenance requirement of $25,000. With the new FINRA rule, that amount gets multiplied by the same factor of magnification of returns that a particular leveraged ETF uses, according to a notice on the rule FINRA circulated in September 2009.

For example, pattern day traders in margin accounts using ProShares funds that multiply returns by a factor of 2 would have a $50,000 minimum daily maintenance requirement. Such traders favoring Direxion triple-exposure funds would have a $75,000 minimum daily maintenance requirement.

Rule 2520 is obsolete:

finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=3668

I'm not sure if your understanding is correct as I don't use margin for any 3x ETF's

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Old October 24th, 2016, 04:30 AM   #7 (permalink)
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RAM011558 View Post
Good Morning,

I am fairly new to this so please forgive what may be simplistic questions. Here's what I know. In order to avoid settlement delays, one must trade in a margin account. A pattern day trader must have a minimum balance of $25K. Here's what I don't know.

For a 3 X leveraged ETF, do you need to keep a minimum of $75K in a margin account ($25K x leverage)?

I won't be using margin, does this matter?

If the $75k is a requirement, is there a way around this?

I read somewhere that most people trading leveraged ETF's don't trade in a margin account. If this is the case, what other account type would they be using?


Appreciate the help with this.

If you don't use a margin account, the PDT rules don't apply.

T+3 (settlement requirement) only applies to the funds used, not necessarily the whole account.

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Old October 25th, 2016, 02:08 PM   #8 (permalink)
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RAM011558 View Post
Good Morning,



For a 3 X leveraged ETF, do you need to keep a minimum of $75K in a margin account ($25K x leverage)?

I won't be using margin, does this matter?



Appreciate the help with this.

No you only need $25K to day trade. It used to be that you could make 3 day trades in at 5 day period.

You require a margin account to get around the 3 day settlement but you do not have to use margin.

It is hard to find the Truth when you start your search with a preconceived notion of what the Truth will be.
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Old October 30th, 2016, 12:12 PM   #9 (permalink)
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Thank you for the information. Very helpful.

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Old November 6th, 2016, 03:52 AM   #10 (permalink)
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deaddog View Post
... It used to be that you could make 3 day trades in at 5 day period. ...

AFAIK, you can still make 3 day trades in a 5 day period with less than 25K.

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