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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: LPS5 who wrote (6735)	1/30/2000 10:49:00 PM
From: Dan Duchardt	Read Replies (3) \| Respond to of 18137

LPS5, 220.8 is the place I went searching for the words that would prohibit active trading. Obviously, I never found them Yet, I have heard over and over again that if you repurchase a security you held overnight after having used the proceeds from the sale to buy and later sell another security to raise cash for the repurchase, you have exceeded your buying power and will generate a margin call even in a margin account. If this is not a limitation of Regulation T, where does it come from, or is this a misunderstanding? If I might press the issue a bit further, a self managed IRA is one type of cash account where certain aspects of what is allowed under 220.8 would lead to a violation of IRA rules. Specifically, part (ii) of a) Permissible transactions. In a cash account, a creditor, may: (1) Buy for or sell to any customer any security or other asset if: (i) There are sufficient funds in the account; or (ii) The creditor accepts in good faith the customer's agreement that the customer will promptly make full cash payment for the security or asset before selling it and does not contemplate selling it prior to making such payment This would not be allowed because one cannot make cash payments to the account in excess of the annual limitation on IRA contributions. Similarly, a broker could not sell a stock in the belief you would later deliver it. Is there some special limitation on IRA accounts (by regulation) that prohibit active trading assuming you never spend more cash than is actually in the account? In other words, can you choose to actively trade an IRA account without being in violation with the letter of the law? A CPA on another thread offered the opinion that it would be a violation of IRA rules because you can only "pattern daytrade" in a margin account, and you cannot have a margin account in an IRA. Based on the definition I posted earlier, you cannot be a pattern daytrader unless you daytrade, and you only daytrade if you use margin to do your buying and selling. Seems we have a circular thing going on here. For anyone who has some insight to offer on this, I don't want it to turn into another discussion of big brother protecting us from ourselves, or one of how wise or foolish it might be to actively trade an IRA account. What I want to know is what limitations are imposed by regulation, and what is being imposed by one broker that another might legitimately allow. Thanks again Dan