Day-trading margin
I think that the most common misconception about day-trading buying power is that people forget that buying power is set last night and does not increase during the day.
Although some firms boast about "updating buying power intraday," all that means is that the firm can, first of all, calculate it accurately (because the day trading margin is based on your largest intra-day position and therefore the firm must keep a "time and tick" record) and, second, they can reduce your buying power intraday.
The other is that sometimes traders forget that the margin reason for not carrying positions overnight is that then you can ignore Regulation T, except that Regulation T requires that you pay for 100% of any loss on day trades .
For day trades, you "pay" with maintenance excess, which is calculated as follows:
Long market value $100,000
Minus debit balance ($50,000)
Equals equity $50,000
NASD maintenance requirement @ 25% $25,000
NASD maintenance excess $25,000
Day trading buying power (2 X NME ) $50,000
But if the firm's maintenance requirement is 30%, then your excess is only $20,000 and your DTBP only $40,000.
Where you see differences among firms, it's not so much in how they are applying the rules, but what their maintenance requirement is, since the rules require that if the firm's requirement is higher than NASD/NYSE's 25% requirement (I'm ignoring shorts here), that the firm's requirement applies.
Here's the NASD Notice to Members that explains these calculations and gives examples:
nasdr.com
Also, this proposal, which is still pending, is of interest:
nyse.com |
