Pattern Day Trading Disclosures


OptionsHouse does not promote or recommend the practice of Day-Trading. Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day trading is extremely risky and can result in substantial financial losses in a very short period of time.

While day trading is neither illegal nor unethical, it can be highly risky. Most individual investors do not have the wealth, the time, or the temperament to make money and to sustain the devastating losses that day trading can bring.

If you effect four or more stock or options day-trades within a five-day period in a margin account you will be characterized as a “Pattern Day-Trader”. A Pattern Day-Trader must maintain at least $25,000.00 in account value in order to continue day-trading practices. In the event that a Pattern Day-Trader does not maintain $25,000.00 in account value, they will be restricted to closing orders only until the account’s value increases above $25,000.

An OptionsHouse account may be flagged for day trading if it regularly recycles funds within the same day. If an investor sells a security for a premium and proceeds to purchase another security when no other capital is available and prior to funds being cleared, the account may be flagged as a day trading account.

If your account is designated as a pattern day-trading account and the equity in the account meets or exceeds the minimum required equity amount, your account may be eligible for day-trading margin, which is two times the account’s actual buying power (“Day-Trading Buying Power”). Day-Trading Buying Power may only be used intra-day and may not be held past market close. OptionsHouse may make a margin call or liquidate positions in your account if you have exceeded your account’s actual buying power after the close of trading. You are responsible for understanding day-trading margin requirements and Day-Trading Buying Power. Further, you are responsible for understanding the risks associated with day-trading, for maintaining sufficient equity in your account and for promptly funding all margin calls. If a day-trading margin call is not met within 5 business days, the account will be restricted to cash only for a period of 90 days or until the day-trading margin call is met (whichever comes first).

Funds or securities received and deposited by our clearing firm will not increase the account’s Day-Trading Buying Power until the next business day. Further, customers will not be allowed to day-trade using any proceeds from closing overnight positions until the next business day; proceeds from overnight positions can only be used to create another overnight position. Per industry regulations, Day-Trading Buying Power is the buying power in your account as of the previous day’s close of business. For additional information on Day-Trading margin requirements, please view the following website: www.finra.org.

OptionsHouse does not promote or recommend the practice of Day-Trading.

FINRA day-trading risk disclosure statement

You should consider the following points before engaging in a day-trading strategy. For purposes of this notice, a “day-trading strategy” means an overall trading strategy characterized by the regular transmission by a customer of intra-day orders to effect both purchase and sale transactions in the same security or securities.

Day trading can be extremely risky.

Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day-trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses. Further, certain evidence indicates that an investment of less than $50,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $50,000 or more will in no way guarantee success.

Be cautious of claims of large profits from day trading.

You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses.

Day trading requires knowledge of securities markets.

Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading.

Day trading requires knowledge of a firm’s operations.

You should be familiar with a securities firm’s business practices, including the operation of the firm’s order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to system failures.

Day trading will generate substantial commissions, even if the per trade cost is low.

Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings. For instance, assuming that a trade costs $16 and an average of 29 transactions are conducted per day, an investor would need to generate an annual profit of $111,360 just to cover commission expenses.

Day trading on margin or short selling may result in losses beyond your initial investment.

When you day trade with funds borrowed from a firm or someone else, you can lose more than the funds you originally placed at risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sale of those securities or other securities in your account. Short selling as part of your day-trading strategy also may lead to extraordinary losses, because you may have to purchase a stock at a very high price in order to cover a short position.

Potential Registration Requirements.

Persons providing investment advice for others or managing securities accounts for others may need to register as either an “Investment Advisor” under the Investment Advisors Act of 1940 or as a “Broker” or “Dealer” under the Securities Exchange Act of 1934. Such activities may also trigger state registration requirements.

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