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Does the Day Trading Rule Apply Only if I Use Leverage?

May 14, 2020

No, the rule applies to all day trades, whether you use leverage (margin) or not. For example, many options contracts require that you pay for the option in full. As such, there is no leverage used to purchase the options. Nevertheless, if you engage in numerous options transactions during the day you are still subject to intra-day risk. You may indeed incur substantial loss due to a pattern of day-trading options. Again, the day-trading margin rule is designed to require that funds be in the account where the trading and risk is occurring.

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Introduction to Day Trading

Introduction to Day Trading

Market BasicsStocks & ETFsDay trading refers to buying then selling or selling short then buying the same security on the same day. Just purchasing a security, without selling it later that same day, would not be considered a day trade. Does the rule...

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Day Trading Requirements

Market BasicsStocks & ETFsThe rules adopt the term “pattern day trader,” which includes any margin customer 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. Under...

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Introduction to Day Trading

Why Day Trading Margin Requirements are Important

Market BasicsStocks & ETFsThe primary purpose of the day-trading margin rules is to require that certain levels of equity be deposited and maintained in the margin accounts of Day Traders, and that these levels be sufficient to support the risks...

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