High Water Mark (HWM)

When two or more day trades occur on the same day in the same customer’s account, the day trade margin requirement is computed utilizing the highest (dollar amount) total open positions (based on requirements) during that day.

Example #1:

Trade 1 BTO 1000 ZZZ $45. Premium $45,000. Day trade requirement $22,500.
Trade 2 BTO 500 QQQ $60. Premium $30,000. Day trade requirement $15,000.
Trade 3 STC 500 QQQ $60.
Trade 4 STC 1000 ZZZ $45.

Both ZZZ and QQQ were open at the same time, and then day traded. The High Water Mark for these trades is therefore the total of the opening requirements, or $37,500. If starting day trading buying power was less than this amount, a DT call would be issued.

Example #2:

Trade 1 BTO 1000 ZZZ $45. Premium $45,000. Day trade requirement $22,500.
Trade 2 STC 1000 ZZZ $45.
Trade 3 BTO 500 QQQ $60. Premium $30,000. Day trade requirement $15,000.
Trade 4 STC 500 QQQ $60.

In this case the stock ZZZ was closed before the QQQ stock was opened. Therefore the HWM occurs at Trade 1, and the day trade charge is $22,500.

Example #3:

Trade 1 BTO 1000 GDX $50. Premium $50,000. Day trade requirement $25,000
Trade 2 STC 1000 GDX $50.
Trade 3 BTO 750 FAZ $60. Premium $45,000. Day trade requirement $33,750.
Trade 4 STC 750 FAZ $60.

In this case the stock GDX was closed before the FAZ stock (3X ETF) was opened. The HWM occurs at Trade 3, and the day trade charge is $33,750.

Note: The HWM is based on the requirement, not the premium. So, while the customer day traded $50,000 of GDX, and only $45,000 of FAZ, FAZ has a 3X ETF requirement of 75%, and the highest requirement is used to calculate the day trade charge.