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Author: sonar69 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 36686  
Subject: Re: Shorting (re Eddie's question) Date: 6/27/2001 1:09 AM
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Wish I had the link to the entire article, but I dont...way too long anyway.

If I remember right, the $25,000.00 requirement only applies to accounts that do 4 day trades a week. That is, 4 same day buy and sell of the same stock.

For me, the rule wont apply. I only trade 3 or 4 times a week and some of the trades are overnight. I go under the $25,000 limit at times because I pull money out to fund ROTH's. I am so excited the limit for ROTHs' is going up.

Anyway, back the the $25,000 rule. At DATEK, when I short then buy a stock in the same day, my cash balance and purchasing power are way over stated. I think from the artice I read, most accounts are like this. I could actually go long after a short then buy 3 times my ACTUAL cash balance in the same day. According to DATEK, I would get a margin call (they called it something different) at the end of the day. Even if I sold the long that was over my actual buying power the same day. I would have to send in cash to fulfill the margin call. They specifically said I COULN NOT sell securities to fulfill this type of margin call.

Now, IMO, this is a stupid rule. I am a big boy. I know close to what amount I have to trade with including margin. I really dont look at my cash balance and buying power on a daily basis. What does the $25,000 have to do with people exceeding their buying power anyway? If I have $25,000 in my account, I can trade $50,000 (with margin). If I make trades that make my account overstate my buying power for the day, I can still over buy or short. Why the $ 25,000.00 limit?

I use most of my margin limit every day. I also use very tight stops. The times I dont use most of my margin is when I might hold the stock over night. Now if a trade goes really well, and I think the next day will go well, I might keep overnight. I only do this because the stock could gap the wrong way but I have good profits from the previous day. Also, I use QQQ's a lot. Not going to get a home run with QQQ's, but they are not going to go the wrong way as fast either.
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