Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Herm who wrote (12394)	2/24/2000 8:29:00 AM
From: jaytee	Respond to of 14162

Hi Herm: How would you phrase it (when you set up your new acct) so as to avoid this problem in the future? And, who are you considering as the "finalists" for your switch in brokers? thanks jaytee

To: Herm who wrote (12394)	2/28/2000 1:02:00 AM
From: Dan Duchardt	Read Replies (2) \| Respond to of 14162

Herm, I have expended considerable effort over the past month trying to find a definitive source on this free-riding issue. So far I have not been successful. What I do know is the "rule" is not uniformly applied. Between myself and another individual I met at the Expo in NY last weekend, we identified no less than 5 OnLine brokers who will let you trade all you want in a cash account as long as you have money in place. All of them do intraday accounting and credit your account immediately when you sell something. Basically, your account operates under the restriction you had imposed on you- no three-day grace for settlement. But with immediate credit for sales you are not restricted from using your money many times during the day. Other brokers impose the free-riding rule. As far as I can tell, they use, or have a history of using, end of day accounting. Since they only look at your account at the end of the day, they have no way of knowing if you spent more money than you had in your account at any moment during the day. They must assume that if the sum or your purchases exceeds the cash you had to start with, plus the proceeds from any sales of securities you held from the prior day, then you have used excess money for those purchases (free-riding). Under Reg T, they should generate a demand for payment of the excess and you should have your 3 days to get them the money, but if it's a retirement account that has capped contributions your are out of luck and are facing a "restriction", or worse (loss of IRA status for breaking IRA rules?). In this case that might mean you cannot even use the proceeds from sales until the following day, or settlement day. I'm not sure on that point since I've not gotten there yet. <g> I'd love to hear from somebody who can point to a definitive SEC rule on this issue. Please post a link to it if you can. Dan