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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade -- Ignore unavailable to you. Want to Upgrade?

To: Dan Duchardt who wrote (2100)	2/16/2000 12:48:00 PM
From: Wayners	Read Replies (1) \| Respond to of 2120

In this example, a customer starts the day with $50,000 Reg T excess. The final paragraph in the example says that if daytrading results in a $20,000 loss, the customer will get a Reg T call for the entire $20,000 (even though at the end of the day the account still has a $30,000 Reg T excess). In the example there was no Reg T margin deficiency in the beginning ($50,000 excess) and none was created (still $30,000 excess at end of day). I think the concluding paragraph is wrong. Am I missing something?( The customer does have a Reg T margin deficiency on day 2 but not a Rule 2520 day trading deficiency. Going into day 2, the customer is only allowed to buy $100,000 worth of non-daytrade stuff. This guy buys $300,000 which is $200,000 more than what is allowed by Reg. T. Its only okay for this customer to do this if a) its a daytrade only AND b) he/she does NOT lose money on the trade. This customer closed out the trade before the end of the day and is subject to a call of $20,000 which is the amount of the losses. Good move on the customers part because if he/she didn't close at the trade at a loss, the Reg. T margin call would have been for the amount he/she overspent the Reg T. buying power of $100,000---he/she would have generated a call for $200,000 by buying this $300,000 worth of stuff. The Reg. T buying power for the next day is the value of the stocks minus twice the credit. The value of the stocks is $400,000 and the credit is $150,000 from the original purchase plus the $20,000 loss the guy had on the daytrades. So the Reg. T. buying power is $400,000-2*($150,000 + $20,000)= $60,000. The Reg. T. excess is half that, which is the same as the $30,000 you calculated. However the customer can only use this on day 3 and can not use it retroactively back to purchases made on day 2. Purchases made on day 2 rely solely on the calculations of buying power made on day 1. Buying power does not change intraday, therefore he can't use tomorrow's excess for today's deficiency. He can only use today's excess for today's deficiency.