The New Day Trading Rules - Part 2
There are several notable changes
on how margin calls are handled as well. One which used to be a thorn in
the side for many traders has now been eliminated. In the past, a position
sold and repurchase on the same day which was opened on a previous day
was considered a day trade and often led to margin calls by traders due
to differences in intraday and overnight margin. This possibility no longer
exits as the sale of the position is now treated as a liquidation of the
existing position and the subsequent repurchase as the establishment
of a new position which is not subject to the rules affecting day trades
unless it is also closed that same day.
Additionally, cross-guarantees to
meet daytrading margin calls, as well as minimum equity requirements, are
now prohibited. This means a trader cannot borrow from another trader to
meet a margin call or minimum equity requirement. The trader is independently
responsible for meeting margin calls or minimum equity requirements.
Should a trader receive a margin
call, his/her buying power will be cut in half. Instead of 4:1 they will
only have 2:1 margin until the call is met. If the call is not met by the
fifth business day then the PDT would be limited to trading on a cash basis
for 90 days or until the call is met.
Swingtraders and position traders
are not affected by the new rules but you must be careful. Traders mixing
styles or taking stops in the same day the position sets up are at risk
of being considered a pattern day trader as only six trades out of every
100 you make within a 5 day period can be day trades before you are labeled
a PDT.