NOptionsGuru

So I just sent the following letter to the SEC regarding my thoughts to the Pattern Day Trading rule. I seriously doubt that anything will come of it, but after watching Visa today spike and not be able to take advantage of any of the movement due to this ridiculous rule, I needed to vent my frustration to the source. This isn't the first time I've missed out on momentum plays because of this rule and I'm sure it won't be my last. I am open to any thoughts and comments you all might have on this subject as well. Sit down and set a few minutes aside... it's a read. To whom this may concern: I am a small trader who is absolutely fed up with the Pattern Day Trading rule. There have been many occasions where I could not take advantage of momentum movements in stocks due to this rule. I am not trying to knock the cover off the ball with any of my trades. If I were, I would not be writing this letter because I would have either lucked up and hit a home run and my account would be over the 25k requirement or, the more likely case, I would be broke. I really think that it's amazing that I am not broke already due to the pattern day trading rule. Because of that rule, I have to be absolutely perfect in my timing and execution of the orders that I place because I know I won't be able to get out of the trade with a small loss and then reenter the trade under more favorable conditions. I also find myself fighting the urge to enter more riskier day trades in order to get lucky enough to bring my account that much closer to the absurd 25k level that somehow make me qualified to day trade. What really boggles my mind is the fact that if I want to trade options, something I would consider far more risky a trading vehicle than mere day trading momentum, all I have to do is sign an agreement with my broker acknowledging that I understand the risks associated with options and if I haven't educated myself, which sadly most investors don't, I'm all set to lose my shirt even faster than if I were day trading and be left scratching my head thinking, "The stock went up, I had long call options, so why did I lose money?" Where did this 25k level come from? What makes someone with 25k more qualified to day trade than someone who doesn't have an account that size? It's my money. If I want to day trade with it, I should be able to sign a brokerage agreement stating that I understand the risks associated with day trading just like I have to do if I want to trade options. This notion that the SEC and FINRA is "protecting" the small investor with this rule is completely delusional. It is more of a hindrance than any sort of protection and by preventing the small investor from being able to adequately use all the tools available to be successful in the market. I say adequately because three day trades in a rolling five day period is far from adequate. Trading is part science and part art. What would have happened if Picasso was only limited to three brush stokes in a five day rolling period when he was just starting to paint? Or if Mozart could only write three notes to a symphony in a rolling five day period? They both could have still been successful, however, it would have taken much longer to get there and there would have been much less in the end due to those restrictions when they were just starting out. This notion that brokerage commissions when day trading are too costly for someone with less than 25k in their account can be thorn out the window. As competitive as the online brokerage industry has become, commissions have dropped to almost nothing. In conclusion, there have been too many times where I have been in front of my computer watching stocks move unable to to take advantage of the momentum due to the pattern day trading rule. I should be able to sign a brokerage agreement acknowledging the risks associated with day trading just as I can with options and then be able to day trade no matter what my account size. Thank you for your time.

I've been trading on TM for about a year now and absolutely love it. I've heard many complaints about TM's customer service, but I've never had any issues when contacting them. I really enjoy the tools that they provide, the fact that their platform is very user friendly and not cluttered, and their commissions are great. My only complaint is that their charting need a bit of improvement. Not that it's bad, but it could use a little work.

Well, I would just like to start off this thread by saying that you're on the right track but your logic is slightly off. If I'm understanding you correctly, you're saying, "If ebay tanks 50% who cares..." So you're not concerned with the paper loss that you would take on the stock if it dropped 50%? Lets think about that for a minute. Selling an at the money (ATM) covered call will only give you limited downside protection. So if you buy Ebay at 34.25 and sell a May 34 Call for 1.01 as in your example, your cost basis (CB) for the trade is 33.24. Therefore, so long as ebay stays above 33.24 you are making something. Below that you are losing money. Another thing to think about is this simple fact: volatility = risk. The more volatile the stock is, the more risk is involved. Hence why options premiums for high volatility stocks are much larger. This type of trade works best when the stock and the overall market is in a stagnant to slightly bullish trend. You wouldn't want to implement it during any time of pending news where you are capping your upside potential and not giving yourself all that much downside protection. There's a whole lot more to it than what is written above but I'll leave it at that in order to keep from writing a book. As I would do prior to implementing any new strategy, I offer this piece of advice to you. Paper Trade paper trade paper trade... for a few months and see how it's working out for you, what changes you need to make to "fine tune" the strategy and once you are happy with the results, then take it to the real world of trading.