Are there any negatives associated with being classified as a pattern daytrader?

[TonyM]

It looks like my account will probably end up being coded as a pattern daytrader after reading the info on Scottrade's site. I couldn't see any differences between that and the way I trade now since setting up a margin account. Is there anything I should know or something I'm missing? While I'm on the subject of margin, I don't see any fees charged for using the margin for a few hours a day, do the brokers tally it up at the end of the month, is there a way to determine a running total before billing?

[metalheadrr3]

Scottrade uses a weird way of applying interest [don't know if margin accounts are the same]. I think they do it daily. I know with Ameritrade I get dinged monthly for my interest. Easiest way to calculate it is just day the APR / whatever metric you want [days/year, hours/year ect] and multiply that by your average ______ margin balance [insert same metric there]. Then if you are ever in cash deduct the interest from the margin interest. Fun stuff. I just accept that I'm going to be dinged $40 a month or so and move on lol.

[bahroor]

A "pattern day trader," includes anyone with a margin account that day trades (buys then sells or sells short then buys the same security on the same day) four or more times in five business days.
A pattern day trader must maintain minimum equity of $25,000 on any day you trade. The required minimum equity must be in the account prior to any day-trading activities. If the account falls below the $25,000 requirement, you will not be permitted to day trade until the account is restored to the $25,000 minimum equity level.

[aiki14]

It just means you'll have to have a higher minimum balance for the acct. It was 25k I think. The free ride rules apply to everyone regardless.

[metalheadrr3]

Yea I've gotten those 'round-trip' warnings from ameritrade a few times. I usually skirt it by buying at the end of the day and selling the next moring [charts permitting]. You can also avoid it by not day-trading with your margin account [but what's the point in that lol].

[bahroor]

Originally Posted by aiki14

It just means you'll have to have a higher minimum balance for the acct. It was 25k I think. The free ride rules apply to everyone regardless.

I thought it does NOT apply if you have a margin account?

Speaking of "free ride"... I might commit my 1st one ever tomorrow morning when I sell a position one day early... does anyone know what the punishment will be?

(My name is Ab, and I'm a Scottrade addict)

[aiki14]

90 days cash only is the penalty, settled funds only

[bahroor]

that's not too bad i guess.. and 2nd and 3rd offenders carry the same sentence?
i could call them in the AM, but so many great people here.

thanks Jim

[soundlanguage]

Originally Posted by bahroor

I thought it does NOT apply if you have a margin account?

Speaking of "free ride"... I might commit my 1st one ever tomorrow morning when I sell a position one day early... does anyone know what the punishment will be?

(My name is Ab, and I'm a Scottrade addict)

I tripped that wire over the summer, no biggie for your first i think. They shot me an email notice and left a msg at the house, offered to explain what the policy is, left a call back #. I blew it off having known damn well their policy, sorry and thank you very much ...

Nothing more came of it but i haven't repeated. The 2nd must lead to a cash only rule then 3rd is likely a temporary freeze from trading. They're cool but try to follow code, don't sweat it. The wrist slap is worth the $$$!

[TonyM]

I certainly appreciate the responses but I'm still not clear on this, I found this on Scottrade's site:

If you purchase stock with borrowed money, you can pay for the transaction in full by the settlement date and no interest will be charged.

Which sounds like I will avoid interest accrual by daytrading the stocks.

The free ride rule I'm not clear on either, Scottrade's site warns me if I might be about to commit a free ride violation and has not done that since being on the margin account and since I did a daytrade on Monday and another on Wednesday I would expect an e-mail and a notice when I log into my account as that's what happened when I took a free ride back in August. My broker also called me to let me know and she suggested I open a margin account to avoid this problem. I'll give her a call and see what Scottrades policies are on these questions.

It does appear from all of your replies though, that there are no downsides to being termed a pattern daytrader (the account balance requirement is not an issue)