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Strategies & Market Trends : From the Trading Desk

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To: Mark Davis who wrote (4937)3/30/2002 6:12:00 PM
From: KFE of 4969
 
Mark,

Are you saying the option position is not counted as equity in your account at all?
If so , is this universal or broker specific?


Yes, only margin equity counts so options and non-marginable securities do not towards the $25,000 limit. It does not make any sense because the intent of the rule was to make sure that "pattern day traders" were adequately capitalized. You could have seven figures in non marginable securities and receive a margin call. When I received the margin call I believed that my firm was interpreting the rule incorrectly so I contacted the NYSE person responsible for this rule and he confirmed that it really did not seem to make sense in this instance but the firm's interpretation was correct and there should be a margin call. He said all firm's should be interpreting it this way. My firm actually apologized but said they had no control since it was an exchange rule.

Regards,

Ken
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