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Would this count as a day-trade?


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Would this count as a day-trade?

  #1 (permalink)
Lumpet
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Hi all,

If on Monday I buy 200 shares

and on Tuesday I sell 100, then sell 100 and then I buy 200 of the same,

Does it count as a day-trade under the day trading rules?


I'm asking this because my broker does not keep track of day-trades and I would like to avoid going over the 3 in 5 business days limit as I do not have a $25,000 account.

So, I am not a day trader, but I dropped by here anyways because I couldn't find a definitive answer to this anywhere else.

Thanks

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  #3 (permalink)
 
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 Big Mike 
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Yes, it counts as a day trade anytime you buy and sell the same instrument in the same day.

You can find details on the Pattern Day Trader rules here, this IB link does a good job:

https://www.interactivebrokers.ca/en/trading/marginRequirements/patternDayTraders.php?ib_entity=ca

Mike

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  #4 (permalink)
Lumpet
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I actually did read that very same IB page before asking here on this board, but my scenario wasn't among the examples.

In this document (below is supposed to be a link):

nyse.com/pdfs/im01-9Microsoft%20Word%20-%20Document%20in%2001-9.pdf

it states (in the beginning of page 2):

"The amendments redefine the term "day trading" to treat the sale of an existing position held from the previous day as a liquidation, and the subsequent repurchase of that position as the establishment of a new position not subject to day trading margin requirements."

Thus, if I buy 200 on Monday and sell 200 on Tuesday and repurchase 200 on Tuesday, it wouldn't be a day-trade.
But, what if I sell 100 and 100 - would it still be considered "liquidation" and the subsequent repurchase not be a day-trade?

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  #5 (permalink)
 
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 Big Mike 
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I think the issue is buy/sell same day, same instrument.

So regardless of the day you bought, if you sold today and bought more today, or even if you bought more today then sold today (order doesn't matter), I believe that is a "day trade" per the PDT rules.

Mike

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  #6 (permalink)
 
Big Mike's Avatar
 Big Mike 
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BTW, should really ask your broker as its them you'll be dealing with if the flag your account as a PDT.

Mike

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  #7 (permalink)
Lumpet
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I did ask but strangely I got some conflicting answers. So I'm looking on my own.
I found this on it, too : h t t p : // research.scottrade.com/public/knowledgecenter/education/article.asp?docId=59c2e9d10010443ba3dbc53db3b360f2

I'm fairly sure that it would not be a day-trade, but I wanted to ascertain, as my broker doesn't count day-trades, and so I might end up with a disabled account if I inadvertently do day-trades.

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  #8 (permalink)
 
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 Big Mike 
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Lumpet View Post
I did ask but strangely I got some conflicting answers. So I'm looking on my own.
I found this on it, too : h t t p : // research.scottrade.com/public/knowledgecenter/education/article.asp?docId=59c2e9d10010443ba3dbc53db3b360f2

I'm fairly sure that it would not be a day-trade, but I wanted to ascertain, as my broker doesn't count day-trades, and so I might end up with a disabled account if I inadvertently do day-trades.

Can't speak for MBT, but with IB you could ask for a waiver like once a year or once a quarter or something like this, where if you got flagged you could ask for a waiver after promising to never ever do it again.

I agree that knowing the rules is smart, but instead of perhaps focusing on ways around the rules you should trade futures instead of stocks?

Mike

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  #9 (permalink)
Lumpet
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I worked out a strategy, and this kind of setup would be a common part of it. To trade futures I would have to learn something entirely new and my account is not enabled for that, and I have never anywhere seen good charts of futures. Do they even exist?

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Last Updated on April 29, 2010


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