Introduction to Day Trading

May 14, 2020

Day trading refers to buying then selling or selling short then buying the same security on the same day. Just purchasing a security, without selling it later that same day, would not be considered a day trade.

Does the rule affect short sales?
As with current margin rules, all short sales must be done in a margin account. If you sell short and then buy to cover on the same day, it is considered a day trade.

Does the rule apply to day-trading options?
Yes. The day-trading margin rule applies to day trading in any security, including options.

What is a pattern day trader?
You will be considered a pattern day trader if you execute four day trades in a five business day period.

Would I still be considered a pattern day trader if I engage in four or more day trades in one week, then refrain from day trading the next week?
In general, once you have been coded as a pattern day trader, the firm will continue to regard you as a pattern day trader even if you do not day trade for a five-day period. This is because the firm will have a “reasonable belief” that you are a pattern day trader based on your prior trading activities. However, we understand that you may change your trading strategy. If you have not placed any day trades within a ninety calendar day period, you may contact us to discuss the appropriate coding of your account.

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